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Table of Contents

ND 1940 88 DH...................................................................................................................2

ND 1945 103 NV (Hektor)..................................................................................................4

ND 1956 175 SH (Pagensand)...........................................................................................11

ND 1961 325 NH (Vestkyst I)...........................................................................................14

ND 1973 450 NH (Ramfløy).............................................................................................17

ND 1974 186 NV (Kingsnorth).........................................................................................24

ND 1979 364 NV (Jobst Oldendorff)................................................................................30

ND 1981 1 Svea (Tsesis)...................................................................................................37

ND 1983 309 (Arica).........................................................................................................42

ND 1991 176 NH (Walker)...............................................................................................51

ND 1996 238 NH (Loran)..................................................................................................55

ND 1999 269 NH (Los 102)..............................................................................................60

NOU 1993:36.....................................................................................................................69

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ND 1940 88 DH

Supreme Court of Denmark, 29 May 1940

Captain P. C. Jensen(Supreme Court Attorney N.J. Gorrissen)

-v-

Københavns Frugtauktioner (Copenhagen Fruit Auctions)(Supreme Court Attorney J.E. Gelting)

En route from Fredriksund to Aarhus carrying crates of potatoes, the vessel had to put into port at Hundested due to bad weather. The delay in the voyage meant that the vessel missed the export connection from Aarhus.The charterer is found liable to pay the cargo owner compensation, in an amount to be determined by the court, for the loss it could have avoided by taking appropriate action if it had been informed about the delay.The Supreme Court rendered the following judgement on Wednesday, 29 May 1940:JudgementThe case is appealed from the Vestre County Court.Nine judges heard this case.The defendant has reduced its claim to Kr. 3500 in the case before the Supreme Court.Five judges voted to uphold the judgement on the basis of the grounds given, save to provide that interest will be calculated from 26 October 1938, as well as to exclude the costs of the case before the Supreme Court.Four judges found that the appellant's failure to contact the defendant does not form the basis of a claim for compensation; that there is no reason to blame the appellant for assuming that the defendant's telephonic enquiry to the port authorities in Hundested was exclusively made for the purpose of ascertaining the position of the vessel.Further none of the information provided serves to support the assumption that any contact made by the appellant to the defendant, would have had the effect of reducing the loss.These judges accordingly find in favour of the Appellant.Judgement was rendered by majority vote.Held:The judgement of the County Court is upheld. Costs of the case before the Supreme Court are cancelled.Payment is to be made within 15 days of the date of this judgement.On 18 October 1938, the Vestre County Court rendered the following judgement in this matter:"The defendant, Captain J.C. Jensen, is found liable to the plaintiff, Københavns Frugtauktioner, in an amount of Kr. 1200 together with interest thereon at an annual rate of 5% accruing from 26 August 1938 until the date of payment.The vessel was lawfully arrested and the arrest stands.

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The plaintiff is awarded security in M/V Inger for the amount of Kr. 1200 and the aforementioned deposited freight amount of Kr. 462.The defendant is to pay court expenses in an amount of Kr. 250 to the plaintiff….

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ND 1945 103 NV (Hektor)

Court of Arbitration for war and sea damage 7 February 1945

Court of Arbitration Ruling No. 42, The S/S “Hektor”.

Marine Insurance Company Vidar(Supreme Court Attorney, Jon Vislie)

vs.

State Hull War Risks Insurance(Supreme Court Attorney, Erling Wikborg)

The S/S “Hektor”, which in March 1942 was sailing in convoy from Kirkenes to Germany, sailed through pack ice during the journey from Lindesnes and Kristiansand. On the orders of the convoy commander, the vessel had to sail at full speed and follow in the wake of the guard vessel even though she could have sailed in an ice-free channel farther out. The “Hektor” suffered extensive ice damage, for which damage the Court of Arbitration finds the War Risks Insurance liable in full, as this voyage is deemed not to be one that a cargo vessel would reasonably undertake during peacetime.

In December 1942, the “Hektor”, which was sailing in convoy, had to abandon the voyage and seek anchorage at Kvellandstrand due to stormy conditions. The guard vessel crossed the path of the “Hektor”, during which manoeuvre the latter lost an anchor and collided with the guard vessel, thereafter running aground. The Court of Arbitration finds that the guard vessel, due to her leadership position, acted in a high-handed manner and without due consideration. This is deemed to be connected to the war situation, wherefore the War Risks Insurance is found liable for ¼ of the damage. Perils of the sea, the storm and the loss of the anchor, are deemed to be the principal causes.

In March 1942, when the S/S “Hektor” was sailing from Kirkenes to Germany with a cargo of ore, the vessel, while travelling in convoy from Stavanger to Kristiansand, entered into pack ice at Lindesnes on 6 March, in which she continued to sail to Kristiansand. The vessel was considerably damaged while travelling through the ice, the damage being valued at NOK 72 890.

In December 1942, when the vessel was sailing in ballast from Ålesund to Kristiansand, once more in convoy, she attempted to anchor at Kvellandstrand on 8 December due to stormy conditions. During this manoeuvre the vessel ran aground and sustained damage valued at NOK 131 308, to which shall be added remuneration for the salvage vessel amounting to NOK 12 000, the total being NOK 143 308.

The vessel’s insurer, Marine Insurance Company Vidar, is of the view that the State Hull War Risks Insurance is liable for the ice damage in full and the grounding damage in part. The company has therefore taken legal action against the State Hull War Risks Insurance by way of this Court of Arbitration, and submitted the following:

Demand

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That the State Hull War Risks Insurance be found liable for the damage to the S/S “Hektor” on 6 March 1942, and liable in part for the grounding on 8 December thereafter, and be ordered to pay legal costs and Court of Arbitration fees.

The State Hull War Risks Insurance submitted the following:

DemandThat the liability for the ice damage be divided between the Plaintiff and the Defendant, and that the Court find in favour of the Defendant regarding the grounding at Kvellandstrand, and that the Plaintiff be ordered to pay legal costs and Court of Arbitration fees.

In the course of this arbitration, extracts from the vessel’s logbook and preliminary enquiry regarding the incidents have been read out, and a total of three witnesses have been heard, namely the vessel’s master at the time, Gullowsen, the vessel’s current master, and then mate, Jacobsen, and the mate, Gundersen. Captain Jacobsen has made a statement regarding the grounding of the vessel, and the 2 other witnesses have given statements regarding both incidents. This evidence will be referred to later, as necessary.

Ice damageIt is evident from the available information that the convoy, in which the S/S

“Hektor” was sailing, was comprised of a guard vessel and two cargo vessels. When the vessels sailed into ice at Lindesnes, it was 12.15 hours. The guard vessel was in front and the S/S Hektor followed as the second vessel in the convoy. Orders had been given in advance regarding the distance to be maintained between the vessels, and this required that the S/S “Hektor” had to sail at full speed the whole time. There is divergent information regarding the density of the ice. According to Captain Gullowsen’s testimony before the Court of Arbitration, the ice was relatively porous to begin with, later becoming more compact, and was thickest at Flekkerøygapet. Jacobsen has likewise stated that the ice was lighter to begin with, then became denser, becoming lighter again on approach to Kristiansand. Gundersen, who only came on duty after the vessel had entered the ice, has stated that it was the same the whole time, and according to his testimony, was packed until the vessel rounded the bend at Flekkerøy. The ice then opened somewhat, only to become thicker again in the stretch towards Kristiansand. Despite the nuances in these statements, the Court of Arbitration finds it certain that the vessel sailed largely in pack ice from the time she entered the ice until she reached Kristiansand at around 1600 hours, which furthermore is in line with the evidence presented at the maritime court of inquiry.

Shortly after the vessel had entered the ice, an ice-free channel was discovered outside the course navigated by the convoy, which, in distances varying from 2 to 5 cable lengths, stretched all the way to Flekkerøy. As soon as the channel was discovered, the S/S “Hektor” steered towards it, but the guard board immediately raised the signal: “Follow in the line of the wake”, and the S/S “Hektor” had to obey this order. At 1300 hours, a leak was discovered in the forepeak.

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The War Risks Insurance argues that in hard winters, such as the winter of 1941-42, difficulties and damage caused by ice must be expected even in peacetime, and that the difficulties caused by ice that winter were no different or greater than previously experienced, without entailing the suspension of traffic. Nor was traffic suspended in March 1942, and therefore the difficulties experienced by the S/S “Hektor” relating to ice, when sailing in convoy to Kristiansand, were no different than those one must expect in peacetime. The damage caused by the continued journey through the ice to Kristiansand should therefore fall outside the War Risks Insurance, with the modification accepted by the War Risks Insurance that, under normal circumstances, a vessel would not have sailed at full speed, and the War Risks Insurance therefore admits responsibility for the excess damage incurred as a result thereof. The War Risks Insurance further admits that under normal circumstances, a vessel would, on discovering an ice-free channel, steer towards it and follow the channel, and that this may therefore also be a question of responsibility, but that any decision regarding the matter must take into account the fact that the S/S “Hektor”, when trying to reach the aforesaid channel, did not alert the guard vessel to its existence. It is in fact possible that the guard vessel had not seen the channel and that permission would have been granted to use it had the S/S “Hektor” informed the guard vessel thereof, in which case the War Risks Insurance cannot be held responsible for damage that may have been avoided had the channel been used.

The Court of Arbitration is of the view that the fact that it is statistically possible to prove that vessels are damaged by ice in hard winters is of no relevance to the assessment of this case, and furthermore, that it is of no significance that it can be proved that shipping as such had not been suspended as a result of difficulties caused by ice. In the first place, ice conditions can vary substantially between coastal areas lying relatively close together and furthermore, the vessels that manage to continue to service coastal areas are ordinary coastal vessels that have been specially built to best handle coastal conditions, and the crews of which have excellent local knowledge and therefore the expertise needed to take advantage of navigational possibilities. Therefore, just because the coastal traffic was maintained, one cannot conclude that it was safe for an ordinary cargo vessel to undertake a voyage such as that taken by the S/S “Hektor” through ice from Lindesnes to Kristiansand. And it cannot be presumed that this journey was such as one could justifiably expect a cargo vessel to undertake in peacetime. A cargo vessel like the S/S “Hektor” should, when confronted with such a large area of pack ice as was the case, have either stopped or attempted to sail out of the ice if possible, and then assessed the possibilities of reaching a port outside Kristiansand. And if the vessel tried to go through the ice, this should be done with the greatest caution, in order to avoid damage and to avoid becoming stuck, so that it was no longer possible to turn around and leave the ice should it prove to be pack ice. Under no circumstances would a vessel travel at full speed through ice as thick as was the case here. Furthermore, it is clear that in peacetime a vessel would not have failed to chart a course for the ice-free channel as soon as it had been discovered.

The Court does not find, as claimed by the War Risks Insurance, that the S/S “Hektor” can be blamed for not explicitly alerting the guard vessel to the ice-free channel. In the given situation, there can be no doubt that if the guard vessel was not already aware of the channel, she would have become so when the S/S “Hektor” tried to

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reach the channel, and would have understood why the S/S “Hektor” was manoeuvring towards it. The Court is therefore of the view that even if the S/S “Hektor” had stated the reason for her change of course and urged the others to follow, this would not have influenced the guard vessel’s decision, and that in all probability, though no grounds were given, the guard vessel’s conduct was motivated by other considerations in connection with the war situation; for example, it is natural to assume that the vessels were better protected against submarines when sailing through ice.

The fact that the vessel had to force its way through thick ice at full speed over a substantial distance, can therefore only be attributed to the guard vessel’s order, which in turn must be deemed to have been motivated by war conditions. As this manner of forging one’s way through ice is far-removed from what can be deemed reasonable and justifiable under normal circumstances, the War Risks Insurance is found responsible for all damage caused by ice. It is not disputed that the entire damage was caused by the vessel’s passage through ice.

It is therefore unnecessary, in terms of the result, to consider the claim by Vidar that the fact that the vessel, which was on route to Germany, was redirected to Kristiansand in the first instance, entails that the War Risks Insurance is responsible for the damage.

GroundingIn respect hereof, the available information indicates that the S/S “Hektor”,

having a forward draft of 8’ and an aft draft of 15’6”, had anchored at Risholmen the day before she ran aground. During the night, a south-westerly wind blew with increasing force and the anchors dragged. In the early hours of the morning the wind gained force, changing to a west-south-westerly direction. On the orders of the guard vessel, the voyage to Kristiansand was recommenced at 0800 hours. When the convoy rounded Hitterøyklubben, the captain of the S/S “Hektor” deemed it irresponsible to continue, and asked if they could return. However, the request was denied on the grounds that that the convoy would have a tailwind once they rounded Lista. But then only 10 minutes later the guard vessel gave orders to return, and the S/S “Hektor” decided to anchor at Kvellandstrand, instead of Risholmen, where the anchors had dragged the night before due to the wind, which was not nearly as strong then as it had now become.

When the S/S “Hektor” neared the anchorage, the guard vessel, which previously had been on her starboard side, was on the portside abaft the beam, and now passed the S/S “Hektor”, crossing her bow to starboard, and like the S/S “Hektor” steered towards the anchorage at Kvellandstrand. The S/S “Hektor” therefore sounded a series of alarm signals, which were answered with three short blasts from the guard vessel, as it dropped anchor and reversed. The S/S “Hektor” issued an emergency full ahead in order to hold course, as the vessel repeatedly fell off by the head, and then full astern, at the same time that the portside anchor was dropped. Statements given by the witnesses at the main hearing regarding the distance between the two vessels at this point vary. However, in his maritime declaration, the pilot stated that the distance was 200-250 metres, and it is thought that greatest weight should be attached to the description given immediately after the grounding, and the distance is therefore reckoned to have been approximately 200 metres or slightly more.

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However, as soon as the portside anchor was dropped, the anchor chain broke, and the vessel issued an order of full ahead, hard port helm. But the vessel fell off sharply and drifted so strongly to starboard that it was impossible to clear the other vessel. The engine was shut off, as the crew was afraid that the propeller would damage the guard vessel. The vessels then collided, and the guard vessel swung astern along the starboard side of the S/S “Hektor” and cleared the vessel to the aft. As a result of the collision, the S/S “Hektor” fell off farther to starboard by the head, and it was now impossible to steer clear of the shore, so the starboard anchor was dropped and manoeuvres were made with the anchor and engine to dampen the impact of the grounding as far as possible, and in an effort to better position the vessel when she ran aground. It is somewhat unclear how much time passed from the point when the portside anchor-chain broke to when the starboard anchor was dropped. According to Gundersen’s statement at the main hearing, it was only ½ a minute, but having studied the accurate times recorded in the logbook, the Court is of the view that approximately 3 minutes must have passed, which also seems reasonable, given the statements of what is said to have happened in the time between the two anchors being dropped.

The Insurance Company Vidar admits that the grounding is in part ascribable to perils of the sea, but claims that war risks also influenced the situation. If the vessel had not been sailing in convoy, she would not have taken the risk of sailing in between the islands, as she was sailing in ballast, but would have sailed clear of the islands from Jæren to Kristiansand, whereby the grounding would have been avoided. If the vessel had not been ordered to leave Risholmen on the morning of 8 December, she would have moved, utilising her anchors, to another anchorage by Risholmen, where she could have remained safely until the storm subsided, and not set out to sea, which was irresponsible given the weather conditions. In addition to this, the guard vessel’s manoeuvres prevented the vessel from regaining her course after the portside anchor chain had broken. It is claimed that on this occasion the guard vessel either acted in her capacity as a military vessel, or showed such a lack of skill as cannot reasonably be expected in peacetime, and the responsibility therefore lies with the War Risks Insurance, as a war risk.

The War Risks Insurance claims that the storm is the principal cause of the accident, and then the fact that the anchor chain broke. Furthermore, it is claimed that errors were made onboard, that the S/S “Hektor’s” trimming possibilities were not fully utilised, and that both anchors should have been dropped simultaneously. The errors on the part of the guard vessel were related to issues of seamanship, which had nothing to do with her military responsibilities, and the War Risks Insurance can therefore not be held responsible for such. It is the War Risks Insurance’s view that the errors made by the guard vessel had no influence on the chain of events leading to the grounding, as it cannot be expected that the S/S “Hektor” would have managed to cope any better once the portside anchor chain broke. In addition, the War Risks Insurance disputes that it can be deemed to be a war risk to sail along the coast, and thus also to anchor at Kvellandstrand, which is normally used as an anchorage. Nor can the order to leave Risholmen represent a war risk that could influence the outcome of this matter. Risholmen had proved to be an unsafe anchorage, so that the vessel had to move, and chose to go to Kvellandstrand, when she returned from being at sea. It is the War Risks

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Insurance’s view that the grounding is therefore solely ascribable to perils of the sea, and that it thereby cannot be held responsible.

It is evident from the above that the S/S “Hektor” was sailing in ballast when she sought anchor at Kvellandstrand during a storm. The following complication then arose as she was about to anchor: the guard vessel, despite warning signals from the S/S “Hektor” that could not be misinterpreted, dropped anchor in the immediate vicinity of the spot that the S/S “Hektor” had selected for anchorage, which must be regarded as the most natural and appropriate place for a large vessel like the S/S “Hektor”, of a good 5000 gross registered tons. And it is not deemed to be an error on the part of the S/S “Hektor” that she upheld her intention to anchor as was the case. If the distance between the vessels once anchored was roughly 200 metres, it must be justifiable to reckon that they could remain at anchor without colliding. The problem arose, however, when the portside anchor chain broke. The fact that the S/S “Hektor” did not immediately drop the starboard anchor does not merit criticism. It is understandable that the vessel then attempted to reverse, in order to anchor at a greater distance from the guard vessel. However, the manoeuvre was unsuccessful as, due to a strong cross wind, the vessel drifted heavily and the distance to the guard vessel was too small. The S/S “Hektor” had to shut off her engines, and as a result thereof the vessel drifted faster towards shore than would otherwise have been the case. When the starboard anchor was dropped, it was purely to minimise the damage that would be suffered by running aground, which one can only agree with the Captain, was now unavoidable. With regard to the S/S “Hektor’s” manoeuvres when dropping the anchor and subsequently, there is nothing for which the vessel can be blamed. Nor is there deemed to be any grounds for faulting the crew for the manner in which the vessel was trimmed at the time.

The storm, and the fact that the portside anchor chain broke, had a determining influence on the damage, and both these factors represent perils of the sea.

But the guard vessel’s manoeuvres, as is evident from that which is recorded above, did contribute. The situation was clearly affected by the fact that the guard vessel, because of her leadership position, acted in a high-handed manner and without due consideration, and it is highly unlikely that any other vessel, on finding herself with the S/S “Hektor” outside Kvellandstrand in peacetime and looking for anchorage to wait out a storm, would act in a similar manner. The difficult situation in which the S/S “Hektor” found herself as a result of the guard vessel’s manoeuvres, and which resulted in the vessel running aground, is therefore deemed to be connected with the war situation, and thus the consequence of war risks, and the War Risks Insurance is therefore liable. This shall apply irrespective of whether the vessel’s manoeuvres were directly ascribable to war considerations or not.

The Court does not find that sailing in ballast along the coast to Kristiansand in the weather prevailing when the vessels were anchored at Risholmen, represents a greater danger than can be reckoned with during peacetime, which is further supported by Gullowsen’s testimony at the main hearing in the Court of Arbitration. This circumstance can therefore not be regarded as a war risk.

It is more doubtful, however, whether or not the fact that the S/S “Hektor” was ordered to sail from Risholmen constitutes a war risk. It must be assumed that the vessel, if she had not received the order, could have moved to a more secure anchorage at Risholmen, where she could have remained safely until the weather improved. The Court

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finds, however, the circumstance that the vessel was ordered to sail from Risholmen, to be such a far removed and coincidental factor in the causal chain of events leading up to the grounding, that it cannot be attributed with any independent significance to the findings of this case.

In accordance with the above, it was the storm and the fact that the portside anchor chain broke, together with the guard vessel’s manoeuvres, that caused the vessel to run aground. The storm and the accident with the anchor must be regarded as more essential causes than the guard vessel’s manoeuvres, and the Court finds, on weighing the significance of the different causes, that the part of the damages for which the War Risks Insurance is liable, can accordingly be set at ¼.

Admiral Smith-Johannsen finds that the guard vessel’s manoeuvres when dropping anchor at Kvellandstrand were not connected to or influenced by war considerations, such as the protection of the convoy or passage in a set formation. The individual vessels, including the guard vessel, at this point made their manoeuvres irrespective of each other. Each vessel chose an anchorage, the guard vessel and the “Hektor” at Kvellandstrand and the German cargo vessel at Risholmen. The fact that the guard vessel, given the prevailing conditions, did not allow the larger and less manoeuvrable S/S “Hektor” to anchor first, and then choose anchorage at a safe distance from the aforesaid vessel, is purely an error of seamanship, which it is reckoned could also be made in peacetime. Thus the marine insurers are responsible for the consequences thereof. The marine insurance should thus carry the cost of the whole damage caused by the grounding of the “Hektor” at Kvellandstrand.

Due to the nature of the case, legal costs will not be awarded.The parties will each pay one half of the Court of Arbitration fees.The dissent is evident from the above.

Court ruling:The State Hull War Risks Insurance is found liable for the ice damage to the S/S

“Hektor”, inflicted on 6 March 1942 and for ¼ of the vessel’s grounding damage incurred on 8 December 1942. Legal costs will not be awarded.

A.E. SoelsethEinar Grette Sven Arntzen

J. Smith-Johannsen Axel Leegaard

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ND 1956 175 SH (Pagensand)

The Swedish Supreme Court, 25 April 1956.

The Mälaren insurance company(Stellan Graaf, attorney)

versus

1) Johann Carsten Koeser, shipowner2) Lübeck Linie Aktiengesellschaft

(1) Cläes Palme, attorney, 2) Torsten Svensson, attorney)

While the “M/S Pagensand” was lying alongside a loading port, the second engineer removed the cover from a sounding pipe and then neglected to replace the cover properly. During the voyage, the cargo was damaged by water, which had poured in through the sounding pipe.This omission was regarded as having caused a defect, which involved an inherent unseaworthiness. Koeser, as the shipowner, and Lübeck Linie, as the time charterer and the party chartering out the vessel for the voyage, were obliged to pay compensation for the damage.The question as to whether there was an obligation to pay was judged in accordance with the parties’ dispositions under Swedish law. German law was seen as applicable with regard to the legal limitation of the shipowner’s liability.Affirmation of the judgement issued by the Svea Court of Appeal dated 28th July 1954, ND 1954, p. 550 and Stockholm magistrates’ court, ND 1953, p. 585.

Koeser and Lübeck Linie applied for a review of the judgement issued by the court of appeal, each claiming that His Royal Majesty, in reversing said judgement, had to affirm the magistrates’ court’s judgement.Mälaren requested confirmation of the court of appeal’s judgement, though waiving the claim for maritime lien.The Supreme Court (Messrs. Ljunggren, Sjöwall, Hagbergh, Digman and Nordström) issued the following opinion: Mälaren and Lübeck Linie have agreed that the question of whether Lübeck Linie is liable for the damage which occurred, will be decided in accordance with Swedish law and that therefore the legal provisions relating to Sweden’s joining the bill of lading convention will apply.Investigation shows that, while the “Pagensand” lay at Stockholm during the period 30th

October to 1st November 1951, for loading the relevant cargo of paper, for which a bill of lading was issued on the 31st October, the vessel’s second engineer removed the cover to the port sounding pipe and then neglected to replace the cover properly, that, from the time the vessel left Stockholm on the 1st November until she entered the Baltic Sea on the 6th November, water had poured into the open sounding pipe, and that this was not

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discovered until the 8th November, or the same day on which the vessel put into a port of refuge.The negligence in respect of closing the sounding pipe caused a defect, which amounted to the “Pagensand” being inherently unseaworthy, unless it had been likely that the defect would have been remedied before there had been any risk of damage. Since, as the court of appeal has found, the facts presented in the case justify the conclusion that regular sounding through the sounding pipe was not conducted onboard the “Pagensand”, it is considered unlikely that the defect would have been rectified before there was any danger.Since the damage to the paper cargo had, therefore, been caused by inherent unseaworthiness and Lübeck Linie had not confirmed that reasonable care had been taken in respect of the “Pagensand’s” seaworthiness at the start of the voyage, Lübeck Linie must, according to legal provisions and the provisions of the bill of lading, bear responsibility for the damage.His Royal Majesty finds that the question as to whether Koeser is liable for the damage should have been decided in accordance with German law. Koeser has, however, declared its liability to be equal to that of Lübeck Linie, and so, on those grounds alone, he is jointly liable with Lübeck Linie to pay compensation to Mälaren.With regard to the question as to which country’s law should be applied in terms of the legal limitation of the shipowner’s liability, the fact, cited by Koeser and Lübeck Linie, that Mälaren’s claim should be tried by a Swedish court, does not provide any decisive grounds for applying Swedish legal principles in this respect; the same applies to the fact that, as a result of the agreement between Mälaren and Lübeck Linie, Swedish law was applied as far as the question of whether Lübeck Linie is liable for the damage which

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occurred. With regard in particular to the fact that the “Pagensand’s” port of registry was in Germany, and German law was therefore the law of the flag (reference to which was, incidentally, made in the bill of lading) and that Koeser was domiciled in Germany and Lübeck Linie was a German company, his Royal Majesty finds that German law shall be applied with regard to the legal limitation of liability.In accordance with the terms rendered, notification of which has now been given, Koeser and Lübeck Linie have paid the amounts claimed in the case, without any reminder having been issued. Damages will therefore be set at this level.On the basis of what has thus been stated, his Royal Majesty will attempt fairly to affirm the court of appeal’s judgement in the main case; however, since Mälaren has waived its claim for maritime lien before his Royal Majesty, the provision relating thereto is vacated.

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ND 1961 325 NH (Vestkyst I)

The Norwegian Supreme Court, 16 December 1961

Mosjøen Aluminium A/S(Attorney Jan Frøystein Halvørsen - under examination)

vs

Johan Aronsen(Supreme Court Attorney Alex. Rein)

The shipowners of the "Vekstkyst 1", which were required to pay compensation on the basis of the Hague Rules for a shortage in a cargo of aluminium bars, claim recourse against the charterer pursuant to Clause 2 of the Gencon charterparty.Oslo City Court, whose judgement is referred to from p. 114 above, held (one judge dissenting) that the agreement contained in the charterparty meant that the owner should be indemnified to the extent of its liability even if the charterer transferred the bill of lading with the effect that the owner was required to pay compensation for the shortage to the receivers in the first instance.The Supreme Court upholds the dissenting opinion of the City Court and does not find that Clause 9 of the Gencon charterparty together with Clause 2 contain a right of recourse against the charterer for any increased liability of the shipowner which may arise as a result of negotiation of the bill of lading in accordance with the mandatory provisions of the Act on Bills of Lading.Judgement (on p. 329)I have come to the same conclusion as the dissenting City Court judge and can more or less adopt his reasoning.On the facts of the case, on which the parties are agreed, there was a shortage in the cargo being transported on board the vessel. In accordance with the Hague Rules and section 118 of the Norwegian Maritime Code, the shipowner is liable for such loss, however the parties are agreed that pursuant to Clause 2 of the Gencon charterparty the shipowner is to be indemnified in respect of losses of this nature. The parties are similarly agreed that when the shipowner has been found liable and required to pay compensation for the loss, it is as a result of the fact that a bill of lading has been issued and transferred to the purchaser of the cargo. This results in the shipowner incurring liability under the bill of lading pursuant to the mandatory provisions of the Act on Bills of Lading. The parties are in full agreement as to the amount of the compensation and the facts of the case.

The only question in this case is whether the shipowner has a right of indemnity against the charterer for the compensation paid by the owner to the cargo receiver. The appellant is of the opinion that the provisions of the Gencon charterparty governing liability as well as the provisions of section 95 sub-section 3 of the Norwegian Maritime Code provide grounds for this claim.There is no doubt that Clause 2 of the Gencon charterparty which extensively limits the liability of the shipowner for loss of or damage to a cargo, does not contain any specific provision to the effect that the owner shall have a right of indemnity against the charterer if it is required by a third party, a cargo receiver, to pay compensation for loss or damage of the type for which the owner has excluded liability in the charterparty.

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Nor does Clause 9 of the Gencon charterparty, together with Clause 2, contain any right by which the shipowner may claim indemnification from the charterer in the event a bill of lading is issued which has the effect of increasing the liability of the owner compared to that set out in the limitation of liability provisions contained in the charterparty. It is only in the event that the bill of lading contains a lower rate than that of the charterparty that Clause 9 contains a clear provision to the effect that the difference in the rates can be claimed on signing of the bill of lading.So, although I cannot see that the charterparty contains any provision as to a right of indemnity in a case such as the case before this court, I remain of the opinion that it must be assumed that the owner can claim indemnification from the charterer when it has been required to pay compensation to the cargo receiver for a loss for which, according to the charterparty, it was not to be liable. If the owner cannot claim indemnification, the limitation of liability provision will to a great extent, have no effect. Since it is common practice to issue a bill of lading, which is then sent to the cargo receiver, this situation will arise regularly.Further authority for the view that there are grounds for a claim may be found in the fact that, pursuant to Clause 9 of the charterparty and Section 95 of the Norwegian Maritime Code, the ship's master is obliged to issue a bill of lading. The charterer has the option to transfer this obligation to third parties and thereby impose on the shipowner liability under the bill of lading pursuant to the mandatory provisions of the Act on Bills of Lading, thereby increasing the shipowner’s liability far in excess of the liability it has pursuant to the provisions of the charterparty.When I nevertheless assume that authority for the view that a claim for indemnification cannot be found in the charterparty, it is because the charterparty does not contain any specific indemnity provisions. The limitation of liability provision in Clause 2 is quite extensive and results in a severe limitation of the liability which the owner would otherwise have pursuant to the Hague Rules and the provisions of the Norwegian Maritime Code. It is natural to interpret such a limitation of liability strictly, and not interpret into its passive exemption from liability a positive right of indemnity, in the absence of definite support for this in its wording.In this respect I also give weight to the fact that Gencon is an old form of charterparty used extensively the world over. We are told that it dates from 1915 but was revised following adoption of the Hague Rules. There must be many instances of cases of this type having resulted in liability to the owner under bills of lading. It must be reasonable then that the charterparty would have contained a clear condition if it had been the intention that it should give grounds for the owner to claim a right of indemnity against the charterer.A further reason to require a specific provision for indemnity is, as the appellant has claimed, the fact that legal writings make clear that indemnity is not automatic, but rather must be specifically agreed.Further, it has not been shown that it is the practice in this country or any other to construe the Gencon charterparty to the effect that it provides the owner with a right of indemnity against the charterer in cases such as the present case, despite the fact that such instances must arise regularly.My interpretation of the matter is that even in cases where a Gencon charterparty has been signed, each shipowner must accept that bills of lading will be issued and negotiated with the result that its liability will be more extensive than that set out in the charterparty. The shipowner is fully aware of this and its third party liability insurance cover also covers its liability. On the other hand, the position of the charterer is that when, as in the present case, it has shipped the cargo and sent the bill of lading, it regards its involvement to be at an end. Any liability of the charterer resulting from the fact that it was obliged to indemnify the shipowner would not be covered by the cargo insurers, which would normally be the first to

16

compensate the loss and thereafter claim reimbursement from the owner or its insurers. It would not be usual for a charterer to be insured against such a compensation claim from the shipowner.Nor does the Norwegian Maritime Code section 95 sub-section 3 provide authority for a right of indemnity in favour of the shipowner against the charterer in this case. The terms of that section are direct authority for a claim of indemnification by the shipowner if bills of lading are issued on terms which differ from those set out in the contract of affreightment, if this increases the liability of the shipowner. In this case, it is clear that it is not the terms of the bill of lading that have resulted in the additional liability, but rather the mandatory provisions of the Act on Bills of Lading.It is possible to consider it reasonable to compare the fact that the issuance and negotiation of the bill of lading increase the liability of the shipowner due to the liability provisions of the Act on Bills of Lading, with the situation dealt with in section 95 sub-section 3, i.e. that the terms of the bill of lading depart from the terms of the charterparty. The situations are however not entirely analogous. Liability for bills of lading pursuant to the Act on Bills of Lading is a familiar one. As stated above, I am assuming that the shipowner normally envisages that bills of lading will be issued and negotiated. The issue of terms in the bill of lading that deviate from the charterparty is however a different matter, as they may be unknown to the shipowner. In such a case it would be natural to ensure indemnification of the shipowner.The determining factor for the conclusion that section 95 sub-section 3 cannot be applied in cases such as the present case must be the fact that the report of the Maritime Commission of 1936 at page 41, contains an express statement that the provision is not aimed at such cases, where the bill of lading is subject to the Act on Bills of Lading. This is also emphasised in Jantzen "Godsbefordring til sjøs" second edition, page 152, as follows:"The Act implementing the Hague Rules has the effect that the shipowner can to a large degree incur greater liability to the transferee of the bill of lading than that imposed by the charterparty. However, although this arises by way of an arbitrary and unilateral act of the charterer, namely the transfer of the bill of lading, there is no question of any right of indemnity in this situation unless this is specifically agreed…"Nor has it been shown that the practice has been to construe the legislation to the effect that it gives a right of recourse in such cases despite the fact that, as has been said, it is normal practice for bills of lading to be issued with the resultant liability which exceeds that provided for in the charterparty.I find therefore for the charterer.Neither party claims costs since the case has been brought by the insurance companies involved for the purpose of resolving this as a question of principle.I vote for this:JudgementIn favour of Mosjøen Aluminium A/S.Judge Hiorthøy: I essentially agree with the reasoning and agree with the finding of my colleague.Judge Thrap: I concurJudge Eckhoff: I concurJudge Berger : I concurOn a vote, the Supreme Court found in favour of Mosjøen Aluminium A/S.

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ND 1973 450 NH (Ramfløy)

The Norwegian Supreme Court, 15 September 1973

Arnt Enebakk(Supreme Court Attorney Sverre Sunde)

Vs.

Storebrand(Attorney Ivar Kleiven – test case for admission as Supreme Court Attorney)

The Hull Insurer refuses to pay the claim for the breakdown of the M/S “Ramfløy”, referring to the provisions in the Norwegian Insurance Plan regarding unseaworthiness and non-compliance with safety regulations.

A 74-year old local man without a master’s license was navigating the vessel. The Supreme Court does not find that the seaworthiness requirement has been violated, cf. §2 of the Act Relating to Seaworthiness, as, when realistically assessed, the deficiencies did not entail extraordinary danger.

The safety regulations were violated with respect to having a master with a license, signing-on procedures and an up-to-date navigational chart. But the Supreme Court’s majority finds no causal relationship between these violations and the breakdown, and orders the Hull Insurance Company to pay the claim. What was for the shipowner an unforeseeable accident could just as well have happened if the master had had a valid license. Dissent.

Amendment to High Court Ruling in ND 1972, 428.

Votes:

Interim judge, Dick Henriksen: The M/S “Ramfløy” of Harstad, a cargo vessel of 130 gross registered tons, belonging to Arnt Enebakk of Lødingen, ran aground, when sailing in ballast between Lødingen and Raftsund, at 01.15hours on 25 September 1968 by the Smitskjær channel, sustaining extensive damage. The vessel was insured for NOK 300 000 with Storebrand. The insurance company refused to pay the claim, and Arnt Enebakk filed a complaint in the Ofoten District Court on 21 February 1970. The District Court, including lay judges with relative knowledge of maritime and shipbuilding matters, rendered the following judgement on 22 May 1971:

“The insurance company, Storebrand, Oslo, is ordered to pay Arnt Enebakk, Lødingen, the calculated compensation and, pursuant to the settlement regulations in Chapter 12 of the Norwegian Insurance Plan of 1964, repair costs in connection with the damage sustained by the M/S “Ramfløy” when she grounded on 25 September 1968.Legal costs will not be awarded.”

Following an appeal by Storebrand, the Hålogaland High Court, which also included two lay judges with knowledge of maritime matters, rendered the following judgement on 22 March 1972:

“The Court finds in favour of the insurance company Storebrand.”Storebrand did not claim legal costs.

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The High Court ruling included a dissent, since one of the law judges agreed with the District Court’s ruling.

The facts of the case and the parties’ arguments in the District and High Courts are evident from those Courts’ grounds for judgement.

Arnt Enebakk has appealed the ruling to the Supreme Court. He is granted free conduct of the case for the Supreme Court and has made the following demands:

“1. That the ruling of the Ofoten District Court of 22 May 1971 be affirmed. 2. That insurance company Storebrand be ordered to pay:

court costs for the Supreme Court together with NOK 13 000 to Arnt Enebakk for accrued legal costs in connection with the lower courts and the court reporters for the Supreme Court.”

Arnt Enebakk claims:

That, as grounds for not taking responsibility for the losses suffered, Storebrand has claimed that the loss is in part a consequence of the ship not being in a seaworthy condition (cf. §45 of the Norwegian Insurance Plan), and in part because the Insured violated safety requirements, and it has not been proven that the loss is not a consequence of this violation, which here can be attributed to be the Insured (cf. §48, §49 of the Plan).

As regards the reported deficiencies in seaworthiness, it is pointed out that no-one on board had the prescribed master’s license, that signing-on procedures were neglected and that the vessel lacked an up-to-date chart.

The extent to which a vessel must be deemed seaworthy in accordance with the Plan depends, however, on a concrete assessment, for which the definition in §2 of Act No. 7 of 9 June 1903 Relating to State Control of Vessel Seaworthiness may serve as a guideline.

Johan Enebakk, who was navigating the vessel on this occasion, was, in terms of both his seagoing experience and extensive local knowledge, fully qualified to steer the vessel in the given conditions and at the given speed. Non-compliance with the signing-on provisions is of no relevance to seaworthiness. Nor, in this connection, is it relevant that the lighthouse by the Svellingen channel (Lysøyskjæret), which is far from the channel in question in this instance, was not marked on the chart onboard.

Therefore this is no reason to deem the vessel unseaworthy.Enebakk is of the view that statutory provisions, such as those in the laws pertaining to

navigation and signing-on, cannot be interpreted as safety regulations in relation to §48 of the Plan. Non-compliance with such provisions is therefore only significant when it can be proved that this has resulted in unseaworthiness, cf. §45 of the Plan.

Whether or not it is found that the vessel was unseaworthy or that safety regulations were violated, Enebakk claims that the loss suffered is not a consequence thereof. Johan Enebakk would not have acted differently if he had a master’s license. He did not face navigational problems, and his errors cannot be ascribed to insufficient skills. Nor is the loss due to the fact that a crew was not signed-on, or that the navigational chart was not up-to-date. Johan Enebakk did not look at either the chart or a compass, as this is not necessary when one is so familiar with his local surroundings.

One has to view what happened as a chance accident that could have happened to anyone.

Whatever the case, §20 of the Insurance Contracts Act must be interpreted to mean that Storebrand is not free from responsibility, in that it has not even been claimed that the accident was the result of gross negligence.

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Finally, it is claimed that the Court must at least find in favour of Enebakk pursuant to §59 of the Plan, as in this instance the errors or oversights were perpetrated by the master in a capacity as seaman.

Storebrand has prepared an answer and demands the following:“1. That the Hålogaland High Court ruling be affirmed. 2. That Storebrand be awarded legal costs for the Supreme Court.”Storebrand is of the view that the High Court ruling is correct and that the company

should be found free from responsibility pursuant to §45 of the Norwegian Insurance Plan pertaining to unseaworthiness, and pursuant to §48 cf. §49 of the aforementioned pertaining to non-compliance with safety regulations.

The rules pertaining to unseaworthiness and non-compliance with safety regulations are found to apply for the following reasons, each of which can be attributed to Arnt Enebakk:

1. No-one on board “Ramfløy” had a master’s license as prescribed by the Act Relating to Navigators of 10 October 1958.

2. Johan Enebakk was, under no circumstances, qualified to navigate such a large vessel. He was not signed-on and thus had not undergone the health checks prescribed in this connection.

3. The navigational chart that was onboard was not up-to-date, in that it did not show the new lighthouse by the Svellingen channel.

Neither §45 nor §48 cf. §49 of the Plan require that gross negligence be proven on the part of the Insured.

The High Court has made the correct assumption that the ship ran aground as a result of the fact that the ship was not manned in accordance with regulations since she was sailing without a qualified master. In the view of Storebrand, it is overwhelmingly likely that the grounding would have been avoided had the vessel been navigated by a qualified master, or one who had signed-on in accordance with regulations, or if there had been an up-to-date chart onboard the vessel.

JudgementTestimony for the Supreme Court was taken at Ofoten District Court, where Arnt

Enebakk made a statement of his party’s case, and where 6 witnesses, of whom 4 were new witnesses before the Supreme Court, were examined. Some new documents were submitted.

Johan Enebakk, who was navigating the vessel at the time of the disputed event, has, as a witness, testified that he now believes that he confused the lighthouse at Håkjerringholmen and the flashing light at Hundneset, which he maintains was visible over Svellingan. He previously stated that the flashing light he saw was new, which is the view he held at the maritime court of inquiry, but admits that he might have been confused.

In addition, Johan Enebakk has given the Appellant’s legal representative some more detailed information regarding his experience as a seaman and navigator. This was submitted to the Supreme Court with the Respondent’s consent. The information was as follows:

I 1920-1925: owner and master of “Lydia” 120/130 t.I 1925-1928: owner and master of motor yacht “Anna” 140/150 t.I 1930-1940: bosun [bestmann] on various boatsI 1945-1965: timber merchant in Lødingen. In this period he hired boats to

transport his timber from Namsos to Lødingen. He steered the boats himself, sometimes with and sometimes without a master.

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From 1965: in periods, relief and substitute worker on the M/S “Ramfløy”.

I do not find reason to comment on the new information that has been submitted, as in my opinion it is of no significance to the result.

In the Supreme Court hearing, as in the High Court hearing, the parties are agreed that the case only relates to the question of whether or not there is an obligation to pay the claim, whereas issues regarding the calculation of the claim and the insurance settlement shall be kept separate.

I have reached the same conclusion as the District Court and the dissenting member of the High Court and I largely agree with the grounds given by these parties, notwithstanding the following addition:

The question as to whether a ship is in seaworthy condition, as set out in §45 of the Norwegian Insurance Plan, or not, must be the subject to a realistic assessment. It is my view that the definition in §2 of the Act Relating to State Control of Ships’ Seaworthiness should be decisive to the guidelines underlying such an assessment. In this instance, the determining factor must be whether the deficiencies cited entailed a greater risk of breakdown than normal, “when taking into consideration the speed for which the ship was designed to travel”.

I am therefore of the view that non-compliance with current manning provisions, master’s license requirements and signing-on provisions was not necessarily a determining factor in the incident, as the ship was navigated by a person who, given the speed at which the vessel was travelling, had qualifications that must be deemed to provide adequate assurance that the voyage would be completed in a responsible manner.

Based on the information provided regarding Johan Enebakk’s intimate local knowledge and previous seafaring experience, information that has been presented to the Supreme Court, and on the fact that the voyage in question was a short one, estimated to take roughly 3 hours each way, and was undertaken in good weather in waters that lay very close to his home, I cannot perceive it to be otherwise than that it was equally safe to let Johan Enebakk navigate the vessel as any person who was less familiar with the area, but who had a master’s license. Additionally, it should also be taken into consideration that he would naturally act with due care as he was the shipowner’s father.

Accordingly, I do not find the fact that the vessel in this instance did not have a licensed master on board made the vessel unseaworthy.

Furthermore, I place no significance in this connection on the fact that signing-on was neglected, in that I find that Johan Enebakk’s eyesight met the stipulated requirements and that he was in good health. And finally, I find it obvious that in this instance the fact that the chart was not up-to-date was of no consequence to the vessel’s seaworthiness.

Storebrand’s pleading of unseaworthiness therefore does not succeed.However, I do find that Arnt Enebakk has violated the safety regulations set out in §48

cf. §49 of the Plan, in regard to the requirement that a master shall have a valid license pursuant to the manning provisions, and the requirement that charts shall be up-to-date. I have no doubt that safety regulations that have been adopted by law are to be considered as safety regulations pursuant to the Plan.

The question is, therefore, whether it has been proven that the loss in question is not a consequence of these violations

I find it obvious that the deficiencies with respect to the chart, which Johan Enebakk did not use due to his local knowledge, were of no consequence to the course of events and similarly that there is no relevant causal relationship between the violation of manning provisions and the accident.

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According to the available information regarding Johan Enebakk’s qualifications, I find that it is proven that the loss is not a result of the fact that the person navigating the vessel did not have a master’s license.

It cannot be ascertained what caused Johan Enebakk, having commenced the voyage in the correct manner and having planned to continue the voyage using landmarks and lighthouses in the correct way, suddenly to make such an error in navigation so that the vessel ran aground.

I must find that this is due to an oversight that, whatever the cause, can neither be ascribed to insufficient seafaring experience nor to a lack of theoretical knowledge. I am forced to view the incident as an unfortunate occurrence entirely beyond anything that the shipowner could have reasonably expected, and which for that matter, could have befallen a master with or without a license.

Thus I find that the violation of safety regulations does not relieve Storebrand of its responsibility.

In accordance with the findings that I have expressed, I find no grounds to consider Enebakk’s arguments regarding §20 of the Insurance Contracts Act and §59 of the Plan.

In line with the findings and the nature of this case, I find that Storebrand shall pay legal costs to Arnt Enebakk and the State in accordance with the demand.

Supreme Court Attorney Sverre Sunde has submitted the following costs for the case that have been paid or are required to be paid by his client:

Supreme Court Attorney Hans J. Bjørnstad:

Total fee for District Court and High Court NOK 9 000Fee for recording of evidence for use by Supreme Court NOK 1 000Costs in connection with District Court and High Court hearings,

Including travel for High Court Attorney Bjørnstad and Client NOK 3 000

TOTAL NOK 13 000

The accounts will be used as a basis.State costs in the event of an admitted free conduct case for the Supreme Court amount

to:Supreme Court Attorney Bjørnstad:

Fee for work on notice of appeal fixed at NOK 500Supreme Court Attorney Sunde:

Fee fixed at NOK 5 200Costs for transcript NOK 1 300

TOTAL NOK 7 000

I vote for the following Ruling:

The District Court ruling is affirmed.Storebrand shall pay NOK 13 000 to Arnt Enebakk in legal costs for the District

Court, the High Court and recording of evidence for the Supreme Court. Storeband shall pay NOK 7 000 to the Ministry of Justice, for the State, in legal costs

for the Supreme Court.

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The deadline for satisfying these obligations shall be no later than 2 weeks after the service of the Supreme Court ruling.

Judge Schweigaard Selmer: I have reached the same conclusion as the High Court, and can largely subscribe to its reasoning.

Provisions pertaining to unseaworthiness are set out in §2 of the Act of 9 June 1903 Relating to State Control of Ships’ Seaworthiness and §63 of the Insurance Contracts Act, cf. §45 of the Norwegian Insurance Plan. The provisions in these two acts do not entirely coincide. Any assessment as to whether a ship is seaworthy in relation to insurance must be based on the provision in the Insurance Contracts Act. Further to §63 of the aforementioned Act, if a ship is not “properly manned”, or to quote the words used in the reasoning for §45 of the Plan: if the ship is not manned “as she should be, in accordance with prudent seamanship, for the voyage she is about to undertake”, this is sufficient to declare the ship unseaworthy. When applying these standards, I assume that one should bear in mind that compliance with the requirement that the master shall have a license must be deemed to be of considerable importance to safety at sea.

I therefore find that as the master of the M/S “Ramfløy” did not have the required license, it cannot be said that the vessel was “properly manned”. However, in order that the Insurer shall be relieved of its obligation, the damage must be the result of such unseaworthiness, and this causal relationship does not always necessarily exist, even though the master does not have a license, cf. Rt. 1971 page 1364. In the case in question, however, I find that there is a clear causal relationship, and in this connection refer to the High Court’s findings regarding Johan Enebakk’s qualifications and his actions in connection with the accident. It is therefore my opinion that there are not sufficient grounds to depart from the High Court ruling. In particular, I would point out that Johan Enebakk did not check his course with the help of a compass when he so substantially changed his course to head in the direction of the new beacon. At the recording of evidence for the Supreme Court, Eilif Mosand, who has been a teacher and examiner for the master course, testified that the ground rule in navigation that course changes should always be checked with a compass is drummed into pupils. It must be assumed that a person with the necessary theoretical knowledge to be issued a master’s license would have used a compass in connection with the change in course that was made.

I agree with the initial opinion that the failure to adhere to signing-on regulations and the certificate requirement represent a violation of current safety regulations. However, I would disagree that Arnt Enebakk has proved that the loss is not a consequence of non-compliance with the certificate requirement, and refer to what I have already stated regarding causation.

In connection with the Appellant’s citation that §20 of the Insurance Contracts Act also applies in instances of unseaworthiness and non-compliance with safety regulations, it is noted that in the Supreme Court ruling of 16 June 1973 on the dispute between Insurance Company Neptun and Siraco A/S, it was established that §20 does not apply in the case of unseaworthiness, which is regulated by §63 of the Insurance Contracts Act. Nor can §20 be invoked in the event of non-compliance with safety regulations, in that such negligence is specially regulated by §51 of the Insurance Contracts Act. Furthermore, in accordance with this provision, it is sufficient that the Insured has shown ordinary – plain – negligence.

The Appellant has also cited that Arnt Enebakk’s negligence must by rights be reported, pursuant to §59 of the Norwegian Insurance Plan, because it was in the capacity of shipowner that Arnt Enebakk allowed his father to navigate. In this connection, I find reason to point out that in criminal proceedings Arnt Enebakk would be sentenced for using his father as shipmaster. Even if it is unclear who was actually the master, and even if Arnt Enebakk had only used his father as helmsman, as shipowner he was still fully aware of and

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responsible for the fact that the boat did not have a master with the required qualifications, and thus §45 cf. §48 of the Plan shall apply, and not §59.

Judge Leivestad: I am in principle and in terms of the result in agreement with the initial opinion of Judge Dick Henriksen.Judge Bølviken: Likewise.Judge Hiorthøy: Likewise.Following the vote, the Supreme Court passed this

Ruling:

The District Court ruling is affirmed. Storebrand is ordered to pay legal costs to Arnt Enebakk amounting to NOK 13 000 for the District Court and High Court hearings and the recording of evidence for the Supreme Court.Storebrand is ordered to pay legal costs to the Ministry of Justice, for the State, amounting to NOK 7 000 for the Supreme Court hearing.

The deadline for satisfying the obligations shall be no later than 2 weeks after the service of the Supreme Court ruling.

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ND 1974 186 NV (Kingsnorth)

ARBITRATION AWARD - 25 September 1974

Wallcarriers Inc(Supreme Court Attorney Ole Torleif Røed)

-vs-

Kingsnorth Shipping Company Ltd.(Supreme Court Attorney Gunnar Thommessen)

Withdrawal of M/S "Kingsnorth" from a charterparty pursuant to "punctual and regular payment" clause.Payment instructions were given in a timely manner, however a misunderstanding by the charterer's New York bank resulted in the payment reaching the agreed account in Stockholm a few days late. The charterer was not aware of the delay and the owner did not make any demand, but would not permit its bank to attempt to trace the payment.The arbitration tribunal found that from a Norwegian perspective it would be unreasonable if such a delay should provide grounds for termination when there is no reason to fear that the charterer was unable or unwilling to make payment. It was against good business practice to insist on termination in such circumstances.

I. IntroductionThe case relates to the question of the legality, pursuant to Norwegian law, of the defendant's withdrawal of the vessel M/V «Kingsnorth» on the basis that "punctual and regular payment" of the timecharter hire was not made in accordance with Clause 5 of the Produce Time Charter 1946.Article 17 of the charterparty stated:"That should any dispute arise between Owners and the Charterers, the matter in dispute shall be referred to three persons in Oslo, one to be appointed by each of the parties hereto, and the third by the two so chosen, their decision or that of any two of them, shall be final, and for the purpose of enforcing any award, this agreement may be made a rule of the Court. The Arbitrators shall be commercial men." In accordance with this Clause, the applicant has appointed shipowner Knut H.Staubo and the defendant has appointed shipowner Halfdan Ditlev-Simonsen, jr. as arbitrators. These two have together appointed Supreme Court Attorney Finn Scheie as the third member of the court of arbitration and the court's referee.The tribunal was constituted on 6 November 1973 and the case commenced with a summons of the same date. Each party delivered two sets of written pleadings. The oral hearing took place on 3 and 4 September 1974. Neither party nor any witnesses were heard. A number of English judgements on withdrawal of vessels from time charters were cited and pleaded.II. The Facts(1) In accordance with a time charterparty dated in Stockholm on 26 October 1964, the M/V «Grimland» of Landskrona, being 26,700 dwt. and owned by the shipowning company Grimland, was chartered by Wallcarriers Inc., Panama City. This company was a subsidiary of the Wallenius shipowning company of Stockholm.The charterparty was entered into on the Produce Form 1964 and was originally for a period of 10 years. By way of an Addendum No.1 of 3rd December 1964, the charterparty was

25

extended from 10 to 12 years. By way of an Addendum No. 2 of 7 January 1965, it was agreed that the timecharter hire which was originally set at 19 Shillings (Sterling), should be paid in US Dollars on the basis of an exchange rate of USD2.781/2 for 1 £ Sterling.(2) Pursuant to a Memorandum of Agreement dated 25 January 1973, the M/V «Grimland» was sold to the defendant, Kingsnorth Shipping Company Ltd. The applicant consented to the sale. The purchaser undertook to comply with the terms of the charterparty as if it was originally a party thereto. Further, both the purchaser and the seller guaranteed that neither the change of owner nor the change of flag of the vessel would have any adverse effect on the time charterer.Section 9 of the Memorandum of Agreement stated:"Notwithstanding the sale of the vessel by Vendors to Purchasers as aforesaid, the Charter and this Agreement shall be deemed to be Norwegian agreement and shall be construed and have effect in accordance with Norwegian law, and Charterers, Vendors and Purchasers hereby submit themselves to arbitration at Oslo in accordance with Norwegian law."The vessel was re-named the M/V «Kingsnorth» and in accordance with the agreement, changed to Greek flag. The new owner took title to the vessel on 26 February 1973.(3) On 1 February 1973, the Wallenius shipowing company received the following message from the purchaser of the vessel (the defendant in the present case):"Please advise charterers future payments to be made to Skandinaviska Enskilda Banken, 8 Kungstradgardsgaten, Stockholm, S 10640 (hereinafter "S.E-banken"), for account of Morgan Guaranty Trust Company of New York, 33, Lombard Street, London E.C.3. Credit Omega Trading Corporation."Charter hire was payable in advance on the 10th of each month. All future correspondence with the purchaser was to be addressed to Valiant Steamship Co. Ltd., London.(4) The first two payments of hire to the vessel's new owners - due on 10 February and 10 March 1973 - were made as usual. As far as previous payments of charter hire are concerned, i.e. those from commencement of the charterparty until the transfer of the vessel to the defendant in February 1973, nothing has been produced in this case which suggests that any of these were paid other than in the usual way.(5) In respect of the charter hire due on 10 April - for the period 10 April to 10 May 1973 - the Wallenius shipowning company produced the usual Freight Statement. This was dated 6 April 1973, which was a Friday, and was sent to the defendant at the given address of Valiant Steamship Co. Ltd. in London. According to the applicant, this letter was posted in Stockholm on the same day, and to its knowledge should have arrived at the addressee in London on Monday 9 April or Tuesday 10 April at the latest. The defendant claims that the letter was not received until 13April. As is noted below, this is the day after the defendant withdrew the vessel on grounds of late payment of charter hire.(6) On 6 April, the date of the Freight Statement, the applicant sent a telex instruction to its bank in Paris, Banque de l'union Europeenne (hereinafter "Norebank") to make certain payments of hire. Insofar as it related to the charter hire at issue in this case, the telex instruction sent on 6 April at 1156 reads as follows:"1145 Please arrange following payments by cable with value Monday 9 April and charge to our account 25 834 J 1) US Dollars 65,951.74 to Skandinaviska Enskilda Banken, Stockholm, for account Morgan Guaranty Trust Co. of New York, 33 Lombard Street, London EC3 for credit Omega Trading Corp. ref. M/V Kingsnorth CP 64-10-26."The stated amount of US Dollars 65,951.74 is the net amount of hire due in accordance with the aforementioned Freight Statement.The telex was properly received by Norebank.(7) On the same day (6 April), having acted on the payment instruction (see point (8) below), Norebank sent written confirmation that the transaction had been effected and that the

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corresponding value had been debited from the bank's account for shipowning company A/B Soya - Wallenius's principal company. The confirmation was received by A/B Soya, Stockholm and was stamped as received on Monday 9 April. The confirmation stated (in French):"You have received by cable US $ 65,951.74 to Skandinaviska Enskilda Banken Stockholm, for account Morgan Guaranty Trust Co of New York, 33 Lombard Street, London EC3 for credit Omega Trading Corp. Ref. M/V Kingsnorth CP 64.10.26."(8) At 1515 (European time) on Friday 6 April, Norebank sent the following telex to its correspondent bank in New York, Marine Midland Bank (again in French):"Account Rederi AB Soya/StockholmPlease effect the following transfers with value 9th:1…….2. US Dollars 65,951.74 to Skandinaviska Enskilda Banken Stockholm, for account Morgan Guaranty Trust Co of New York, 33 Lombard Street, London EC3 for credit Omega Trading Corp. Ref. M/V Kingsnorth CP 64.10.26."The telex arrived on opening in New York on Friday 6 April.Marine Midland Bank did not deal with the matter until Monday 8 April, when it sent the following telex to Norebank at 16.25 European time:" Re yours April 6 test 4764 value today stop would you please clarify second payment quote: 65.951 Dollars 74 chez Skandinaviska Enskilda Banken Stockholm pour compte de Morgan Guaranty Trust Company Londres faveur Omega Trading Corp. ref. MV Kingsnorth CP 64.10.26 unquote please clarify urgentlymomWould you call us back as soon as possible."A reply to this telex was not sent until 11 April at 11.20, when the original instruction was simply repeated. Marine Midland Bank then effected the requested transfer in their books with value 9 April in accordance with Norebank's telex. On the same day (11 April) Marine Midland Bank sent a written advice notice of the transfer to Skandinaviska Enskilda Banken, Stockholm. This letter of advice was neither confirmed by telex nor telegram.(9) When on 12 April, the defendant's representative in London, Valiant Steamship Co., had not received notice that the charter hire had been paid they sent a telex at 11.30 asking S.E- banken if they had received a payment of "approximately Dlrs 73/74000". When the Bank replied that it had not received any such payment, a telex exchange took place during which the shipowner instructed the bank to refuse to accept payment if Wallenius should attempt to make payment and to advise the owner accordingly. S.E-banken replied that they would contact Wallenius to which the owner replied:"Do not repeat do not call or communicate with Wallenius-rederierna in this matter over."(10) At 1422 on 12 April a further telex exchange took place between Valiant Steamship and S.E-banken, followed by a telephone conversation, which was confirmed by the bank in a telex sent at 14.43, stating:"Re our telephone conversation some minutes ago stop confirming we are unable to trace any transfer for US Dollars 73,000 or 74,000."(11) On 12 April at 15.30, Valiant Steamship Co. sent the following telex to Wallenius:"M/V Kingsnorth T/C 26.10.64 Owners hereby notify Charterers that in view of default in payment of hire due on 10/4/73 Owners hereby withdraw the vessel from Charterer's service under clause 5 of the timecharter."(12) The applicant and S.E-banken immediately contacted Norebank in Paris. After sending a telex notifying of the instructions received and effected by Norebank and which are set out in detail above, the applicant protested at 1715 on 12 April that it had done what was necessary to make payment of US Dollars 65,951.74 on 10 April 1973.

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(13) The owner replied on 12 April at 1837 as follows:"Note procedural arrangements but unfortunately the funds were not received by Skandinaviska Enskilda Banken 8 Kungstradgardgaten Stockholm for value 10/4/73 by the time we gave notice of withdrawal and therefore the notice of withdrawal stands."(14) Maintaining its point of view, the defendant refused to accept the charter hire payment of 10 April, which was thereafter placed by the applicant in escrow with Morgan Guaranty Trust Co., London, as was the charter hire payment due on 10 May 1973.(15) When M/V «Kingsnorth» arrived at Antwerp on 22 May, the vessel was arrested by the defendant. The arrest was lifted following agreement by the parties that the vessel could continue on charter unchanged pending an arbitral decision on the matter. In the event that the owner's claim was upheld, the charterer was to pay an agreed additional hire. The charterer's costs in connection with the discharge of the cargo in Amsterdam (Norwegian kroner 111,026) are not disputed.(16) The parties agree that the facts of the case are as set out above. They are further agreed that the legality of the cancellation shall be determined in accordance with Norwegian law....V. Decision of Arbitrators(a) The question of late payment(1) In the opinion of the arbitrators, it is clear that the disputed charter hire payment was not credited to the specified account of the owner with S.E-banken in Stockholm on 10 April. The fact that on 11 April Midland Marine Bank in New York credited S.E-banken's account with the hire payment with value 9 April and confirmed this by way of a letter of the same date (11 April) does not change this fact.(2) Further, it is the view of this court of arbitration that there is no doubt that under Norwegian law it is usually the charterer who bears the risk of its chosen method of payment. It is also the charterer who takes the risk that nothing happens in the process that results in the payment failing to be made within the agreed time. Even by showing that the charterer has in every respect taken every possible care, it is not relieved of liability for this risk.(3) This court of arbitration is therefore in agreement with the defendant that there was a late payment in terms of the charterparty.

(b) Does the delay give a right of cancellation?(1) The arbitrators agree with the applicant that in respect of the payment of charter hire due on 10 April, it took every step that could reasonably be expected to ensure that the payment was made in time. Following receipt of the message from Norebank on 9 April that the payment instruction had been effected by telegraph transfer, the applicant had no reason to check that the payment had actually arrived.(2) The arbitrators also rely on the fact that there is nothing to suggest that there were any previous irregularities with the monthly hire payments in a relationship over 9 years and where there were 3 years left to run. The charterer is a well-respected shipowner of considerable standing and there was no reason for the owner to believe that the delay would be repeated nor that it was as a result of a lack of ability or willingness on the part of the charterer to make payment in accordance with the charterparty.(3) It is generally accepted that Section 148 of the Norwegian Maritime Code, on which the charterer relies, gives the owner the right to terminate if the charter hire is not paid on time. The preparatory works to this provision which is common to, and is contained in Section 148 of, each of the Nordic Maritime Codes, nevertheless indicate that the intention of the phrase "timely", is meant to express that «consideration must be given to circumstances which in

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certain instances may result in an incidental short delay.» It is the opinion of this court that such circumstances exist in this case.(4) This court of arbitration finds no reason to consider in more detail whether or not the charterparty's requirement for punctual payment is stricter than the requirements of Section 148 of the Maritime Code. Even if the charterparty's "punctual and regular" wording can be regarded as a more precise term that the Maritime Code's "timely", it is the opinion of the arbitrators that this wording does not give authority to withdraw the vessel irrespective of the slightness of the deviation from the perfect payment and subsequent notification to the owner. Further such clauses must be read in the context of their purpose, which is principally to protect against dishonesty of the charterer, not to give the owner a fortuitous gain by cancelling for market reasons. The court is accordingly in agreement with the applicant in that it would clearly be unreasonable if such a delay should give grounds for termination of a charterparty which the charterer has complied with over many years, in circumstances where there is no indication whatsoever that could lead the owner to fear breach.It is the view of the arbitrators that contracts that are governed by the Norwegian Maritime Codes should not be interpreted so literally as they may be for example, under English law. An example of this is given by the Swedish Supreme Court in ND 1932 page 453, where the owner was denied the right to terminate a charterparty in a case where the hire was "due to oversight" paid one week late. There are also examples in English case law where termination has been refused in circumstances of short delays, which were unforeseen, by the payor: "Petrofina" (1949) 82 Ll L Rep 43, House of Lords. In this case the cheque was sent by post and would ordinarily have arrived at the place of payment in London in time for the due date of 27 September. Due to war conditions, the letter did not arrive until 3 October.This court of arbitration has also found support for its conclusion in Per Gram: "Fraktavtaler" (3rd edition) page 182, where it is stated as follows:"Care and reasonableness must be advised when using such a sharp weapon (such as withdrawal). The owner should not tempt the suspicion that the aim is simply to get out of a burdensome charterparty."(5) Further, in their assessment of the case, the arbitrators have placed considerable weight on the fact that the applicant has shown all vigilance in respect of the hire payment as could be expected and as soon as it became aware of the situation, did all that it could to clarify matters and place the hire at the owner's disposal.On the other hand, the defendant clearly showed a lack of willingness to rectify the matter when it was contacted by S.E-banken despite the fact that there was every reason to believe that there was an unintentional and, for the charterer, unexpected, reason for the payment failing to arrive. On the contrary, the defendant reacted with a categorical prohibition when the bank offered to investigate the matter immediately with Wallenius, at the same time as it instructed the bank to refuse payment if the charterer "should attempt to make the payment now".In this respect the defendant has highlighted the necessity for clear rules in relationships where important financial decisions must often be made quickly. This will be of importance in many cases but in this case, this court of arbitration is of the opinion that an unreasonable result would be reached because the defendant was not willing to make the slightest attempt to clarify the reason for the delay; on the contrary, it demonstrated a fear that the remittance had arrived. There is no doubt that S.E-banken could very quickly have cleared up the situation if the defendant had not forbidden it, nor would it have taken long for Wallenius to pay the hire direct in Stockholm if it had received a demand or notice of the misunderstanding.The court also finds unreasonable the fact that the owner refused to withdraw its cancellation when the matter was fully resolved in the course of a few days.

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All matters taken into consideration, it is the conclusion of this court of arbitration that the owner's actions are contrary to current demands for good business practice, or - if you will - "an important element in today's contract law…the demand for loyalty between parties." (Carl Jacob Arnholm, Privatrett II, Contracts, page 7). Arnholm further states, that "the requirement for loyalty is stronger in a long-standing contractual relationship than in individual speculative business which can be unwound immediately."(6) As a result of the above, the arbitrators consider that the cancellation must be regarded as unfounded and that the English cases referred to by the defendant cannot be relied upon under Norwegian law. Accordingly, this court upholds the applicant's claim.(7) As regards the costs of the case, the finding of the court suggests that these should be borne by the defendant. This also applies to the costs of the court and other costs which are the joint and several liability of the parties in relation to this arbitration. Costs will be fixed in a separate decision.(8) The decision of the arbitrators is unanimous.

VI DECISIONI. Kingsnorth Shipping Co. Ltd are obliged to continue the charterparty of 26 October 1964 with Wallcarriers Inc. against payment of the original rate of hire.II Kingsnorth Shipping Co. Ltd. are to pay Wallcarriers Inc. NOK111,026 for expenses in connection with the discharging in Antwerp on 22 and 23 May 1973, plus interest at the rate of 5% p.a. from 1 July 1973 until payment is made.III Kingsnorth Shipping Co. Ltd. are to pay the costs of the arbitration together with the arbitration court's and Wallcarrier Inc.'s future costs in accordance with separate decision.

Finn ScheieHalfdan Ditlev-Simonsen jr. Knut H.Staubo

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Indemnity claim by the M/V “Jobst Oldendorff's” shipping company against the charterer of the vessel pursuant to a Produce charterparty in respect of the compensation which the shipowner was required to pay to a longshoreman injured during discharging of cargo in the USA.

The court of arbitration discusses the principal issues relating to the legal basis for the right of indemnity in the relationship between shipowner and charterer, in particular the scope of the "Vestkyst" case (ND 1961.325). The indemnity claim was upheld. It was the responsibility of the charterer to arrange and pay for the loading and discharging of the cargo and any third party liability arising in this respect must be considered to be included in such expenses.

It is assumed that the indemnity claim can be reduced in the event of negligence on the part of the shipowner but no such negligence was shown. An American judgement in terms of which the shipowner was held liable to longshoremen on grounds of negligence deemed not to be determinative in the relationship between the owner and the charterer.

ND 1979 364 NV (Jobst Oldendorff)

Arbitration award of 17 September 1979

Egon Oldendorff Shipping Co (Attorney Haakon Stang Lund)

Versus

Paul Wilson & Co. A/S (Supreme court attorney Einar Irgens).

Arbitrator: Professor Sjur BrækhusIV. REMARKS OF THE COURT OF ARBITRATIONA. Are there grounds for a claim for indemnity?The court of arbitration finds it appropriate to begin by considering this question.The charterparty of 2 April 1968 does not include any specific indemnity provisions. The question that arises then is whether there is authority for such a claim in non-mandatory law or whether authority can be found by construing the charterparty on the basis of such law.The starting point must be the general provisions of Norwegian contract law governing indemnity claims between contracting parties, being the rules governing an individual contracting party's right to claim full or partial reimbursement from another contracting party for expenses or liability which it has incurred in connection with the contract. Here a distinction must be made between three categories as follows:(1) The situation where the contracting parties are jointly and severally liable to third parties e.g. for injuries suffered by third parties within or outside of the contractual relationship. The issue of indemnity in this situation is the same as in other cases of joint and several liability - the creditor is free to elect the debtor or debtors against which to bring the claim. As far as the creditor is concerned, full satisfaction by one debtor releases the other debtors from their obligations to him. This does not mean however that the others are thereby released from their obligation to indemnify, as this would have the effect that the common creditor could arbitrarily determine which of the debtors would ultimately bear the loss. For this reason there is a general right of indemnity in cases of joint and several liability: unless otherwise stated in a particular law or expressly agreed, the debtor who satisfies the debt has an indemnity claim

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against his co-debtors to whatever extent is necessary to ensure that the final division of liability accords with the co-debtors' respective liabilities. The extent of the respective liabilities and hence the division of liability can either be fixed by law or be expressly agreed, however in many cases it is ascertained by interpreting or supplementing the contract or other provisions which govern the relationship between the debtors. If there are no means for ascertaining the respective liabilities, the parties will be attributed equal liability. In this respect, reference is made to Arnholm "Privatrett II, 2nd ed. (1974) pp144-145, Augdahl "Den norske obligasjonsretts alm. del., 5th ed. (1978) pp 381-384 and Smith. "Solidaritet og regress i erstatningsretten" (1962) pp 51-53 (= TfR 1961 pp379-381).(2) The situation where a contracting party has incurred expenses or been held liable to a third party in some respect which, in terms of the contract, it is the responsibility of the other contracting party to arrange and/or pay for. For example, the shipowner who has paid bunkers in circumstances where the charterparty provides that the charterer shall obtain and pay for these. There can be different reasons for a contracting party undertaking expenses, which are actually those of the other contracting party. The payment may be made at the request of the other party or for the necessary protection of its interests ("negotiorum gestio"); it is also possible that the contracting party has become liable to third parties on the basis of certain rules of apparent authority and accordingly is required to pay; for example, the master who orders bunkers does not make sufficiently clear that he is acting on behalf of the charterer, with the result that the owner is held liable in accordance with the rules governing the master's legal authority. A contracting party may also act as an intervening payer in its own interests, for example where an owner satisfies an obligation, which is clearly that of the charterer, in order to avoid the vessel being arrested and thereby delayed.In these situations the principal rule is that the contracting party who satisfies the payment obligation has a claim against the other party to be indemnified for this amount. This applies equally in the case where the payment has been made on the instructions of the other party, as negotiorum gestio, as where the party making payment has, due to rules such as those of apparent authority, assumed liability towards a third party. There is some doubt in the case of a pure intervention payment but even in this situation the usual understanding is that the person making the payment has a claim to be indemnified by the other person if it had acceptable grounds for making the payment. In this respect reference is made to Arnholm (supra) p. 145 and Augdahl (supra) pp. 391-393. For an example of a claim for indemnity of this nature in a case involving a charterparty, see ND 1962.1 (Norwegian Arbitration) SIRENES. See also ND 1957.193 (Norwegian Arbitration) at page 198.(3) The situation where a contracting party assumes liability towards a third party for performance for which it is responsible pursuant to the contract but where the contracting parties have agreed between themselves to exclude that party's liability for such performance. A typical example is the situation where a contracting party assumes liability because in the course of performance of the contract, its employees have negligently caused damage to a third party's property. If, in terms of the contract, the contracting party has (validly) disclaimed liability for such a default in the performance of the contractual obligations, the question will arise as to whether it can claim reimbursement of the amount paid from the other party. Such a right of indemnity can be contractually agreed (in any event in contractual relationships where there is freedom of contract such as in contracts for time charters). The agreement does not necessarily have to be express, as the usual rules regarding interpretation and supplementing contracts apply to this issue. The specific assumptions of the parties or the general understanding in a particular trade can, for example, result in exclusion of liability for acts or omissions of employees being interpreted as a complete transfer of liability to the other party, so that ultimately any liability will be for that party. The chain of liability in these circumstances will include a claim for indemnity.

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In Norwegian legal practice the liability provisions contained in Clauses 9 and 11 of the Baltime charterparty have been interpreted as follows: expenses and responsibility which are related to the commercial operation of the vessel including liability for the cargo, are for the account of the time charterer and this includes any liability which can be attributed to acts or omissions of the vessel's crew. Accordingly, if a shipowner is found liable to third parties for cargo damage it has the right to be indemnified by the time charterer. In this respect, see Gram: "Fraktavtaler, 4th ed. (1977) p. 205 and ND 1961.127 (Norwegian Arbitration) GRANVILLE at pp. 137-139. That is not to say however that liability under the Baltime is entirely clear. In ND 1957.61 (Norwegian Supreme Court) SKÅNLAND, which involves the wrongful loading of a vessel, the Norwegian Supreme Court refused to hold the time charterer liable for that part of the loss attributable to an error in judgement on the part of the master.Compelling arguments can also be made against interpreting a limitation of liability clause to the effect that it gives a right of indemnity in situations where a party to a contract has been held responsible to a third party for liability of the type for which it has excluded liability. In support of this, one can argue that limitation of liability provisions are usually narrowly interpreted against the interests of the party seeking to rely on them and that there is, in any event, little basis for giving the limitation of liability a broader effect than provided for in the provision itself. If a party to a contract intends the limitation of liability clause to be used not only as a "shield", i.e. to give it protection against being held liable by the other party to the contract, but also as a "sword", i.e. to form the basis of an active claim for indemnity, this should be clearly stated.The VESTKYST I judgement, ND 961.325 (Norwegian Supreme Court) is an example of an interpretation along these lines. Since the defendant in the present case has relied heavily on this judgement, it is necessary to refer to it in more detail. The facts of the case are as follows: Mosjøen Aluminium had sold a consignment of aluminium c.i.f. to English buyers and in this respect chartered the VESTKYST I on a Cencon charterparty for the purpose of transporting the consignment to England. A shortfall in the cargo was discovered at discharge, for which the shipping company was required to pay compensation; this was due to the fact that the bill of lading for the aluminium had been transferred to the purchaser who was then entitled to hold the shipowner liable on the basis of the Hague Rules (c.f. Act on Bills of Lading 1938 §1a). Relying on the limitation of liability provisions in Clause 2 of the charterparty, the shipowner brought a claim against the charterer, Mosjøen Aluminium, to be indemnified in this respect. Clause 2, however, contained no reference to a right of indemnity.In the leading judgement, with which all the other judges concurred, Judge Leivestad began by pointing out certain elements that supported a right of indemnity but continued as follows:"When I nevertheless assume that authority for the view that a claim for indemnification cannot be found in the charterparty, it is because the charterparty does not contain any specific indemnity provisions. The limitation of liability provision in Clause 2 is quite extensive and results in a severe limitation of the liability which the owner would otherwise have pursuant to the Hague Rules and the provisions of the Norwegian Maritime Code. It is natural to interpret such a limitation of liability strictly and not interpret into its passive exemption from liability a positive right of indemnity in the absence of definite support for this in its wording." (ND 1961 p. 330).Having looked at the rules governing a claim for indemnity in contract, this court of arbitration will revert to the issue of whether there are grounds for an indemnity claim in the dispute presently under consideration. For the time being we leave to one side the particular problems created by the question of possible error on the part of the vessel's crew. Accordingly the assumption is that the damage was caused exclusively as a result of the mistakes of the crane operator, but that the shipowner for one reason or another has been held responsible by the injured party and has been required to pay.

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If the injured party, Lopez, could also have held the time charterer responsible for the crane operator's error (as he could probably have done under Norwegian law), we would have before us an indemnity claim in the category of joint and several liability described at (1) above. If we assume that the time charterer could not have been held directly liable to Lopez under American law, the case falls within category 2 above. In both cases the shipowner has a right of recourse against the time charterer: in terms of the time charterparty and the supplementary rules on time chartering, it is the time charterer who is liable to arrange and pay for loading and discharging of the vessel and all the expenses and all other costs in this respect are for the time charterer's account. Loading and discharging costs and expenses must be assumed to include any third party liability arising as a result of the loading or discharging, no matter what the grounds of liability. If, in the country where discharge takes place, vessel owners have strict liability for damage resulting from an accident in the course of discharging the vessel, e.g. as a result of a technical problem with a port crane, as far as the internal relationship between the owner and the charterer is concerned, this is an expense related to the discharging of the vessel for which the time charterer is responsible. The only exception to this is for expenses, including third party liability, which are due to a mistake or omission attributable to the shipowner or its personnel.From what we are told, it is the time charterer, Wilson, that is responsible vis-à-vis the shipowner Oldendorff, for the costs and expenses of the discharging of the JOBST OLDENDORFF in Stapleton on 21 October 1968, including the liability towards longshoreman Lopez which arose as a result of discharging - always on the assumption that there was no reason to blame the shipowner or its personnel. That American law holds the shipowner liable and requires the shipowner to pay the compensation in the first instance, is of no consequence to the allocation of liability within the private contractual relationship between the owner and the charterer. If necessary this must be resolved by way of a claim for indemnity and the grounds for the claim for indemnity are, as shown, general principles of contract law. It is not necessary to establish a positive contractual right of recourse; but of course the contract must not exclude the right to be indemnified.The precedents applicable to the category of indemnity claims described in group 3 above are not relevant to this case; in reality the situation in these cases is quite different from the other cases. Of particular note in the VESTKYST I judgement ND 1961.325 (Supreme Court) is the fact that it relates to an interpretation of a specific, and very extensive, limitation of liability clause in a voyage charterparty, where the mandatory provisions of the Hague Rules applied, so that definite conclusions cannot be drawn from this judgement in respect of rights of indemnity in charterparty cases. The VESTKYST I case was a dispute between a shipowner and a voyage charterer, which was also the shipper, i.e. a case between shipowner interests and cargo interests. In practice there can be good reasons to be more restrictive with indemnity claims in such relationships, than in cases of the time chartering of dry bulk vessels, where both contracting parties are usually shipping companies. Further, the fact that the liability which gave rise to the right of indemnity in the VESTKYST I case was a Hague Rule liability, clearly shows that an indemnity claim against the shipper was refused. This aspect of the matter was not included in the pleadings before the Norwegian Supreme Court, but problems would no doubt have arisen if the right of indemnity had been admitted; indemnity in this situation would have meant that a liability which, according to the mandatory provisions of the Hague Rules, is to be borne by the shipowner, would have been passed onto to the cargo-owner, contrary to the compromise of interests provided for by the Hague Rules. It could perhaps be said that the Hague Rules do not aim to protect the charterer under a charterparty in situations where it is also the shipper, as in the VESTKYST I case. Even if this was the case, an indemnity would have lead to results which would be contrary to the Hague Rules: the shipper, Mosjøen Aluminium, was a c.i.f. seller, which means that the

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risk for the aluminium which was sold passed to the English buyer at the time of loading in Norway (c.f. Sale of Goods Act §63.2). Accordingly as between the seller and the buyer, the shortfall that arose during the voyage was the buyer's risk. The Hague Rules clearly do not apply to regulate the relationship of the sale and purchase, however it would have been curious if, based on a right of indemnity under the sale of goods legislation, the liability for the shortfall had fallen on the purchaser/holder of the bill of lading, whose interests the Hague Rules primarily seek to protect. The proper thing to do must be to preclude the indemnity claim at the level of the shipowner and the voyage charterer/shipper. Similar considerations are not relevant in an indemnity situation such as that in the present dispute and for this reason it would be incorrect to apply any conclusions from the VESTKYST I case to the present case.B. Should a right of indemnity be denied in any event due to the fact that negligence is proven on the part of the ship's hands?It follows from what had been said at A above that the shipowner must bear that part of any third party liability in connection with discharging which can be attributed to negligence on the part of the ship's hands. The shipping company Oldendorff also accepts this.This court of arbitration must therefore decide whether there was any such negligence. In the first place, the question here is whether, as Wilson claims, this court shall without further investigation, rely on the findings of the jury in the District Court of New York in the case between Lopez and Oldendorff.There is no doubt that the judgement in the case between Lopez and Oldendorff cannot be given any formal legal effect in the current dispute - it is a foreign judgement which Norway is not treaty-bound to recognise, and further, it is a judgement given in a case between parties other than those before this court of arbitration. This does not mean, however - as claimed by the time charterer - that it is not open to this court of arbitration to consider the case between Lopez and Oldendorff, for example in respect of the amount of the compensation. It is clear that this court of arbitration must accept as fact that Oldendorff was found liable by the American court to pay, and so had to pay, a particular amount as compensation for the injuries suffered by Lopez during discharging of the JOBST OLDENDORFF.On the other hand this court must be free to characterise the nature of the established responsibility to compensate, in relation to the contract between Oldendorff and Wilson, and the indemnity rules which apply to this contractual relationship. It is not necessarily the case that what is found by an American court (jury) to be "negligence" in the relationship between the shipowner and the longshoreman can also be deemed to be negligence in the relationship between the shipowner and its contracting party, the time charterer, in circumstances where this latter relationship is governed by Norwegian law.However, the fact that this court of arbitration is free to make this characterisation clearly does not mean that it can completely ignore the American court's assessment of the shipowner's position. Extensive witness testimony was presented to the district court providing it with a far better factual basis on which to assess the situation than that presented to this court of arbitration, which leads to this court of arbitration showing a certain reluctance to re-assess the issue of whether or not there was negligence attributable to the vessel owners.In the present circumstances, however, this court of arbitration finds that there are grounds for a re-evaluation. The only criticism which is directed at the ship's hands in connection with the unloading is that prior to its commencement, they removed the wedges and lashings which had held the cargo in place during transportation. This is not a question of lack of vigilance or attentiveness or of unskilled or perfunctory performance of specific operations. The question is rather simple: was it or was it not the case that the ship's hands removed the wedges and lashings before discharging commenced?

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On this point, this court of arbitration finds that it must support the shipowner's standpoint: the wedges and lashings had to be removed before the unloading could commence and according to the terms of the contract between the shipowner and the time charterer, this work was the responsibility of the shipowner's (vessel's) crew. Accordingly, by performing this obligation, the shipowner could not be found to have acted negligently towards the same time charterer.The time charterer has not in fact challenged this argument. It has not denied that the allocation of tasks between the ship's hands and the stevedores was as stated by the shipowner, nor has it been claimed that this allocation was in itself unjustifiable. The time charterer has only alleged that the parties did not know to what extent it was negligent to remove the wedges and lashings before the unloading commenced, and that accordingly, on the question of negligence, one should start with the American judgement. This court of arbitration would add here that the American jury's finding on the question of liability is difficult to follow from a Norwegian law perspective. Even the American judges appear to have had difficulties with the decision of the jury. The district court judge indirectly absolved the shipowner of liability by giving it a full right of indemnity, albeit split 50% to ITO and 50% to Hoffman. The court of appeal must also have found the jury's decision extremely dubious, particularly the finding that the removal of the wedges and lashings could not be regarded as making the vessel unseaworthy, but nevertheless finding this action negligent. The court stated however, that "every effort must be made to reconcile such apparently contradictory findings" and also referred to certain procedural negligence on the part of the shipowner when giving its decision to uphold the district court judgement, "although the issue here is close". From a Norwegian perspective, the jury's label "negligence" appears to disguise fault implied by law, i.e. a form of strict liability. Even if it is a case of fault, it is the fault in the relationship towards the injured party, Lopez. The fact that the shipowner followed contractually agreed routines for the preparation of the vessel for discharge cannot be characterised as negligence in the relationship between the owner and the time charterer. The fact that the vessel was held liable to the injured port worker must be regarded as the effect of a particular liability risk associated with discharging in American ports. In the private contractual relationship between the vessel, the shipowner and the time charterer, this risk is for the latter.For these reasons and on the basis of that stated at A above, the shipowner's indemnity claim is upheld.C. INTEREST AND COSTSThe parties are agreed that 10% penalty interest shall accrue from 1 January 1978.The obligation to pay interest prior to 1 January 1978 depends on an interpretation of the words "contractual debt" in the Act on Promissory Notes §40. The word "debt" suggests obligations of a financial nature. It could however be natural to include in this the obligation to pay agreed contractual remuneration, c.f. the characterisation of trade debts. Reference can also be made to ND 1957.296 (Norwegian Arbitration), where time charter hire due was characterised as "contractual debt" for the purposes of §40 of the Act on Promissory Notes. However, it is difficult to go further than this. If in a contractual relationship the liability to compensate and a right of indemnity in such event were deemed to be "contractual debts", there would be very little difference between "contractual debt" and "claims based on contract". Accordingly interest for the period prior to 1 January 1978 is not allowed.Apart from this last issue on interest, which relates to a relatively modest amount, the shipping company has succeeded in this case on all points. Accordingly, it must be awarded costs as claimed, to which there have been no objections.

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The time charterer must also pay the fees of the court of arbitration and its costs, provided however, that both parties are jointly and severally liable to this court of arbitration for this amount.JUDGEMENT1. Paul Wilson A/S, Hop, is found liable to pay the shipping company Egon Oldendorff, Lubeck USD 202,349.98 together with interest at the rate of 10% pa on this amount from 1 January 1978 until payment is made in full - all in the aforementioned currency or Norwegian kroner based on the prevailing rate of exchange on the date of payment - together with NOK 26,167.80 in costs.2. Paul Wilson A/S and shipping company Egon Oldendorff are jointly and severally liable for the fees and expenses of this court of arbitration. As between them, Paul Wilson A/S is liable for these costs.3. Payment is due within 14 days of the date of this arbitration award.

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(1) The M/T “Tsesis” ran aground on the 26th October 1977 in the Södertälje channel on a bank, which was not marked on the appropriate marine chart, and sprang a leak. As a consequence, 600 tonnes of oil escaped, causing extensive oil pollution. Following a decision by the Maritime Administration, salvage work was started the next day, with the intention of limiting the oil pollution, despite the Master having refused to sign a salvage agreement. Clean-up measures were taken care of at sea by the Customs Authority, and on land they were paid for by the National Fire Commission.Although the bank had been found during a hydrographic survey in 1969, no action had been taken which could have resulted in the avoidance of the grounding. It was therefore considered that the event was caused due to the fault and negligence of the state. The shipowner’s allegation that the state was strictly liable in this case was not accepted. The state was found to be vicariously liable under chapter 3, § 1 of the Law of Damages, and not found liable due to its exercise of public authority, under § 2 of the same chapter. No error or negligence in navigation of the “Tsesis” was found.The shipowner’s claim that he was not strictly liable, pursuant to § 3(1) of the Oil Pollution Liability Act for the oil pollution, since the pollution had been caused by the failure and negligence of the state in its maintenance of navigational aids (§ 3(2) of the same Act) is not accepted, primarily because the marine chart is not regarded as an aid as intended by the Act.In calculating the damages due to the state for oil pollution, the state’s wage and lay time expenses for the personnel and vessels respectively, which had been used in tackling the oil-spill, are regarded as being damages for which compensation is payable. Due to the state’s causative role, the damages were adjusted to three quarters.Regardless of the fact that compulsory salvage had been prompted by the risk of further oil pollution, the compensation that the shipowner was obliged to pay the state for salvage in accordance with the laws on salvage money was determined not to represent a cost for the prevention of oil pollution. With regard to the fact that the causative role in the accident rested solely with the state, the shipowner is entitled to recover the compensation as damages.

ND 1981 1 Svea (Tsesis)

Svea Court of Appeal, 6th June 1981.

The Swedish state (L. Rahmn, attorney, and J. Fransson, Principal Administrative Officer)

Versus

Latvian Shipping Company (C. Palme, attorney, and G. Söderhjelm, Captain).

On the 26th October 1977 at 11:05, the motor tanker, “Tsesis”, carrying a cargo of oil, ran aground in the Södertälje channel outside the Käringklubben skerry in the vicinity of the island of Fifång. The vessel’s hull was seriously damaged and sprang a leak. Over time, approximately 600 tonnes of oil escaped. The Coast Guard took immediate action to tackle the oil-spill, but it was unable to prevent the spread of large quantities of oil. As a result of this there was extensive oil pollution, principally to the shorelines on Torö.The “Tsesis” is owned by Latvian Shipping Co. a Soviet company, hereinafter referred to as the shipowner. The vessel has a dead-weight of 19,335 tonnes. Its maximum draught is 11.72

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metres. The vessel has an engine power of 9,600 horsepower, giving a normal speed in open waters of 14.5 knots.When it ran aground, the vessel was en route from Klaipeda to Södertälje via Stockholm, travelling at a speed of 11-12 knots. Visibility was good. Present on the bridge were the Master, Captain Vladimir Minailenko, the Second Mate, Alexander Reprintsev, the helmsman, Josif Presniak, the look-out, Jurij Smirnov and the Swedish pilot, Hjalmar Nordenberg, who was giving instructions for the vessel’s passage through the channel. At the time of its departure from Stockholm, the vessel’s average draught was measured at 8.65 metres. The channel to Södertälje has a depth of 9 metres. The depth where the vessel ran aground is about 6 metres. The bank is not especially marked on the marine chart 721, which was applicable at the time the vessel ran aground, and it lies outside of the 10 metre depth line on the marine chart. Marine chart 721 is to a scale of 1 : 50,000 and was issued in 1932. It is based on hydrographic surveys carried out between the years 1911 – 1931 (in unimportant areas, the years 1845 – 1873). Most measurements in the area by Käringklubben were taken in 1918. Depths and elevations are given in metres from the average water level attributable to the year of issue, being 1932. The land in this area is rising by 0.4 centimetres a year. The correction for land elevation indicates that the depth will be reduced by 0.2 metres up to and including the year 1987. Older hydrographic surveys carried out in the years 1812 – 1849 found a depth of four fathoms (approximately 7.2 metres) from two soundings south-west of Käringklubben. This depth was entered in a seafloor map that was subsequently drawn up. The results of the soundings taken in 1918 at Käringklubben were shown in a fair chart. Control soundings were taken in the area in 1921, resulting in certain additional figures being included on the aforementioned fair chart. The bank at issue was not discovered during either of these last-mentioned soundings. Soundings carried out up to that point had been taken manually. New soundings were taken in the area in 1969 by means of so-called echo sounding. These were directed by Captain Gösta Grinne, a marine surveyor employed by the Maritime Administration. During these soundings, a bank was found at 5.9 metres south-west of Käringklubben. According to routines that were in place at that time, a preliminary assessment was carried out onboard the survey vessel, from which it was determined that the bank lay within the 10 metre line marked on the marine chart. Its discovery did not, therefore, lead to the director of the hydrographic survey taking any further action. No conclusive assessment of the results of the survey had therefore been made at the time the “Tsesis” ran aground. However, in 1970 a quarter of the survey results (i.e. every fourth sounding profile) were subjected to a data analysis in order to examine the opportunities for a new deep-water channel in Himmerfjärden. On the basis of this data processing, a new fair chart was produced (also called a data chart) in which the 5.9 metre bank was shown. Following the grounding, a new hydrographic survey was made of the site of the accident. The results of this survey have been evaluated and the bank is shown in the 1978 edition of marine chart 721. Following the accident, the Fifång lighthouse has also been re-sectored.The day after the grounding, the Maritime Administration made a decision on salvage actions required to eliminate the risk of any further oil escape. Salvage vessels from Röda Bolaget arrived at the scene and started salvage operations. Captain Minailenko refused to enter into a salvage contract with the company. The Maritime Administration, however, decided that it was essential that the salvage work proceed and it ordered the company to complete the salvage work. Following the salvage operation and lightering of the oil cargo, the “Tsesis” was towed to Stockholm, where she was dry-docked for repairs. The state accepted, via the Maritime Administration, responsibility for paying the company salvage money, if the company could not get this from the shipowner. The state later had to be responsible for the salvage money since the shipowner refused to pay same. The clean-up measures at sea have been largely taken care of by the coastguard, which is administered by the Customs Authority,

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while similar work on land was taken care of by Nynäshamn’s and Södertälje’s local authorities, who received compensation for their costs from the state via the National Fire Commission, in accordance with the provisions of the Fire Prevention Act.

2.3. Compensation for wages and lay time expenses The state’s claim for compensation for wages and lay time expenses is for costs incurred for the coastguard in combating the oil spill subsequent to the accident, being in part the wages of the coastguard personnel, and in part lay time expenses for coastguard vessels which took part in the clean-up work, and which remained at the accident site but which, for various reasons, for example the need for the personnel to rest, could not be used during the period indicated.As has been stated in the district court’s judgement, the shipowner has claimed that compensation should not be paid out for wage costs, since the wages would have been paid to the personnel in question in any case. With regard to the lay time expenses, the shipowner has stated in the court of appeal that half of these must be considered costs that cannot be attributed to the “Tsesis” accident, since these costs would have arisen anyway. The state, on the other hand, has referred to the fact that all the costs have been calculated in accordance with the Customs Authority’s circular.When oil pollution occurs, the state can in principle choose between engaging outside companies for tackling the oil-spill or doing the work using the organisation the state has itself set up for this purpose or which it otherwise has at its disposal. Purely theoretically, there is also the option of leaving the work in any one case to the owners of the individual shorelines.The state said that the charge in the Customs Authority’s circular is based on the principle that the Customs and Excise Department’s own costs for tackling the oil-spill are to be covered. The shipowner has not once claimed that the costs for tackling the oil-spill have been calculated as being greater than they would have been if companies or persons that are independent of the state had tackled the oil-spill. In addition to this, it should also be noted that the provisions of the Oil Pollution Liability Act, stating that compensation must also be paid for costs of preventive measures, would in reality be inoperative if they were interpreted as restrictively as the shipowner maintained they should be. It cannot therefore be assumed that such an interpretation had been intended. The court of appeal finds, for the reasons provided, the same as the district court, that all the wages and lay time expenses paid by the state must be regarded in themselves as damages for which compensation is payable.

3. The state’s claim for compensation for salvage of the “Tsesis”In the court of appeal, the state, in its claim for compensation for the salvage money paid to Röda Bolaget, presented two grounds for payment – arguing partly that Röda Bolaget is entitled to such salvage money, which claim has been transferred to the state, and partly that the salvage money represented a cost for preventive measures as intended by the Oil Pollution Liability Act and that payment must therefore be made for this as oil pollution. The state has said that the cost can in no way be assigned solely to what had been necessary in order to prevent oil pollution. Some division of the cost for, on the one hand, salvaging the vessel and its cargo and, on the other hand, the prevention of oil pollution cannot therefore be made, in the opinion of the state.In the court of appeal, the shipowner referred to what had been said in the district court, and added that there was no entitlement to salvage money, since the master had expressly forbidden salvage of the “Tsesis”, and this prohibition was justified (see § 224(2) of the Maritime Act).As the district court stated in its ruling, after the “Tsesis” ran aground, there was such a salvage situation as is referred to in § 224(1) of the Maritime Act. No investigation has been

40

submitted in the case in support of the allegation that the master had forbidden salvage of the “Tsesis”; even less has it been proven that such a prohibition was justified. For this reason, and in accordance with the rules of the Maritime Act, Röda Bolaget was entitled to salvage money. This right has been transferred to the state.The question as to whether compensation must be paid for the state’s costs for salvaging the “Tsesis” as salvage money or as oil pollution is, to begin with, significant due to the fact that the vessel owner’s liability for oil pollution might be restricted to a certain sum in accordance with § 5 of the Oil Pollution Liability Act, while compensation must be paid in full for salvage money (see article 1 (4) (a) in the 1957 convention on the limitation of the shipowner’s liability, and Swedish Government Official Reports 11961:33 p. 28). The question is of further significance in examining the shipowner’s action of recourse against the state for compensation for salvage money that has been paid out.According to § 1 of the Oil Pollution Liability Act, preventative measures are taken to mean “any measure which is required for good reason to prevent or limit oil pollution damage, and which has been taken after an accident has occurred”. It is further prescribed that costs for preventative measures are to be regarded as oil pollution. Insofar as the intention of the salvage work has been to prevent any threatening oil pollution once the accident has occurred, or to limit the oil pollution that has occurred, the salvage costs are consequently covered by the definition of the concept of oil pollution in the Oil Pollution Liability Act.The decision to undertake compulsory salvage of the “Tsesis” was caused by the risk that there would be oil pollution, in addition to what had already taken place. Even though the salvage was beneficial for the shipowner, in that the vessel itself had been salvaged, all of the salvage money in this case (since the state has said that the salvage money can in no way be ascribed solely to salvaging the vessel) can be regarded in itself as costs for preventative measures.In order to encourage the vessel’s owner to take preventative measures on his own initiative once oil pollution has occurred, or oil pollution is imminent, this party has been given the right, in accordance with § 8(3) of the Oil Pollution Liability Act (see article V:8 of the liability convention) to demand compensation from the limitation fund for expenses he has incurred of his own free will, or for losses which he has suffered on account of preventative measures. If the expense consists of salvage money paid to a salvor engaged by the vessel’s owner, what has been said does not however naturally imply that the vessel’s owner would not be under any obligation to the salvor to pay full salvage money in accordance with ordinary legal salvage rules. The vessel’s owner’s obligation towards the salvor is not changed by the rules of the Oil Pollution Liability Act. If the salvor’s entitlement to salvage money were restricted in this way, it would often prove impossible to get any salvor to take on a salvage job, which could in turn mean that the oil pollution would be made worse. It was clearly not the intention that a result of this kind could be derived from the legislation based on the convention. The vessel’s owner must therefore be liable to pay the salvor full salvage money, though with the vessel’s owner being entitled to register a claim for salvage money with the oil pollution limitation fund, in accordance with § 8(3) of the Oil Pollution Liability Act. When allocating the limitation sum, the vessel’s owner will, for his own part, therefore be able to retain a sum equal to the salvage money, though less that part which is for other compensation claims due to oil pollution.It follows from what has been said that the salvor, if he considers the prospects of receiving compensation for salvage money from the vessel’s owner as unfavourable, is entitled to demand that compensation for the salvage money be paid from the limitation fund as a cost for preventative measures, insofar as the salvage money can be regarded as being such a cost in accordance with the Oil Pollution Liability Act.

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The above applies when the vessel’s owner himself has entered into an agreement with a salvage company for salvaging the vessel and its cargo. The situation in which the vessel’s owner himself does not, or cannot be expected to take measures for salvaging the vessel or the cargo, thereby making compulsory salvage necessary, cannot result in any other judgement. The vessel’s owner should not be able to derive any benefits by delaying the salvage operation.The salvor must therefore be regarded as being entitled to full salvage money, even where compulsory salvage has taken place.Röda Bolaget is consequently entitled to receive from the shipowner compensation in full with respect to salvage money. This entitlement has been transferred to the state. The court of appeal therefore finds, in common with the district court, that the state’s action based on this transfer should be approved.

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ND 1983 309 (Arica)

(45) Time charter on Texacotime form governed by Norwegian law

Question relating to off-hire and bunker expenses in a case where the chartered vessel, the M/V “Arica”, suffered engine breakdown during a voyage from East Coast USA to Japan, and was subsequently towed across the Pacific Ocean for discharge of cargo in Japanese ports. She was thereafter repaired at a Japanese yard. The freight was earned. The vessel owner unsuccessfully demanded payment of the charterhire for the number of days the vessel would have used on a normal voyage together with reimbursement of the bunker expenses that were saved.

On the basis of the wording in the off-hire clause in the Texacotime 2 form, clause 9, the majority of the arbitrators accepted that the vessel went off-hire when the engine breakdown occurred. In contrast to the provisions of § 144 of the Norwegian Maritime Code, the clause contained no provision to the effect that only net loss of time was deductible. In a case reported in ND 1915.168, the Norwegian Supreme Court read such a limitation into a similar off-hire provision, but nevertheless the majority held that the wording had to be read literally and that the claim for the saved bunker expenses could not succeed either.

This interpretation was laid down by the House of Lords in a judgement from 1891 and has subsequently been followed by the English courts. Since the Texacotime 2 form was drafted on the basis of English law, the intention behind the chosen wording must have been to incorporate this rule into the charterparty's off-hire provisions, particularly given that other time charterparties apply a net-loss rule. The intention of the drafters of the form must provide the basis for interpretation under Norwegian law and when the matter is dealt with by the contract itself, there is no reason to supplement the wording with Norwegian background rules of law as stated in the Norwegian Maritime Code §144 and ND 1915.168 Statements of the principles for interpretation of standard contracts.

The minority found that the fact that the charterparty's wording was drafted on the basis of English law did not prevent Norwegian law from construing the clause differently. In many areas of the law relating to chartering, there is a difference between the Norwegian and English interpretation of charterparty provisions. Moreover, the Texacotime 2 form was prepared by charterer's interests, and the off-hire clause is one provision where this is evident. When the standard charterparty has been amended to elect Norwegian arbitration in accordance with Norwegian law, the intention must have been that a Norwegian law interpretation of the charterparty would be binding.

A strict literal interpretation will often lead to the result, unreasonable from the standpoint of the shipowner, that the off-hire deduction will be far greater than the charterer's loss of time and similar costs due to mishaps with the vessel's engines. The judgement of the Supreme Court from 1915 evidences that this should not be accepted under Norwegian law. The Clause ought therefore to be supplemented with the rule contained in the Norwegian Maritime Code § 144.2. On the other hand, the shipowner did not have any claim for savings on bunker expenses.

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Norwegian Arbitration Award of 24 August 1983

Skibs A/S Aino, et. al. (Attorney Haakon Stang Lund)

Versus

Leif Høegh & Co. A/S (Attorney Morten Lund)

Members of the Court: Professor Brækhus and Supreme Court Attorneys Ole Lund and H.P. Michelet.

Page 319V. REMARKS OF THE ARBITRATORSMajority - Professor Sjur Brækhus and Supreme Court Attorney Ole Lund1. The majority will begin by considering the claim by the shipowner that the telex exchange of 19 and 23 February 1982 includes a contractual agreement that the charterer should pay the charterhire for the time a normal cargo voyage to Japan would have taken.Based on the explanations presented to this court of arbitration, it would appear that neither of the parties nor either of their respective brokers had any clear idea as to the solution which the off-hire provisions in the charterparty would provide in this case. The shipowner's manager, Rudolf Marcussen, clearly assumed that there would be such a claim for charterhire if, by being towed to Japan, the “Arica” managed to deliver the cargo to its destinations. This assumption is probably based on an immediate assessment of what would be reasonable in the circumstances: when the shipowner delivers the cargo to the correct destination so that Høegh earns its freight, the shipowner must have a claim for the equivalent charterhire payment from Høegh (at this point the shipowner did not know that the freight was pre-paid). However, there is nothing to show that the shipowner relied on the charterparty's off-hire provisions in its deliberations on this point.The shipowner's understanding of the question relating to the charterhire is clearly set out in its telex of 19 February to Høegh. Høegh, in its telex response of 23 February, did not reject the view expressed by the shipowner on this point, although it did not give its express approval either; the shipowner's right to the charterhire was not mentioned in the reply at all. The question then is whether this passive action on the part of Høegh must be construed as an acceptance of the shipowner's point of view.It is the view of the majority that this passivity cannot be given such legal effect. In the telex of 19 February, the shipowner asked Høegh two specific questions - one in respect of the refund of saved bunker expenses and the second as to the admission of towing costs in general average. Both questions were answered in a telex of 23 February. The shipowner on the other hand, did not ask whether Høegh agreed that timecharter hire should be paid for the duration of a normal voyage. Accordingly, there was little reason for Høegh to take a view on this charterhire issue. Furthermore, Høegh's reply did not in any other way give the shipowner any grounds to interpret silence on this issue of payment of hire, as an acceptance of the shipowner's view. Høegh's reply on the two specific questions is notably very cautious: On the issue of bunker expenses, it would revert later, and on the issue of apportionment of towage expenses, it simply referred to the fact that this would be decided according to the York-Antwerp Rules of 1974. The shipowner ought to have understood that Høegh - if asked - would have not wanted to commit itself to an answer on the issue of timecharter hire either. The shipowner has stated that Høegh's uncertainty on the issue of bunkers shows that it had accepted the owner's position on the issue of charterhire; if the vessel had been totally off-hire during the voyage to Japan, it would have been clear that there could be no question of any

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right to a refund of bunker costs. It is the view of this court of arbitration that this is a very exacting construction of Høegh's telex. The fact that Høegh found the bunkers question to be doubtful, could also be related to a degree of uncertainty in respect of the off-hire question.If having its construction of the charterhire issue accepted by Høegh was critical to the shipowner, it could have specifically asked the question of Høegh. This was not done, presumably because at that point the shipowner had already made its decision to allow the vessel to be towed to Japan, cf. the statement in the shipowner's telex of 10 August that it would have the vessel towed "at any rate".2. On this basis, the charterparty's off-hire clause and its construction will be determinative for the claim of the shipowner.On first reading, the wording of the clause appears to necessitate the result that Høegh advocates, namely that the “Arica” went off-hire when the engine breakdown occurred, which implied "commencement of…loss of time", and that it did not go on-hire again until the vessel was repaired and was "again ready and in an efficient state to resume her service." The Clause has no provision to the effect that it is only the charterer's net loss of time within this time frame that can be deducted from the charterhire.It can often be relevant to construe a contractual provision to give it a more limited scope than an isolated reading of the wording would give. Such a restrictive construction of the current off-hire clause would have been possible if this clause had been new and untested, and particularly if it had been drafted specifically for this contract. Norwegian judges seek as far as possible to interpret contracts so that the result is a reasonable and sensible one in the relevant circumstances. If the wording of the contract appears to exclude such a solution and the judge either cannot or will not rely on a mandatory rule of law giving him authority to police the clause, he is required to seek assistance from one or more of the established interpretation techniques. One of these is to refer to the presumed common assumptions of the parties; the parties cannot have contemplated the current situation when the clause was drafted; had they done so, they would certainly have provided an exception from the contract's general provisions. This presumed exception rule is then read into the clause by the judge. Another technique is to supplement the clause with non-mandatory rules of law ("jus dispositivum") such as §144.2 of the Norwegian Maritime Code, on the basis that the clause provides an incomplete regulation of the question in issue or that it cannot have been the intention of the parties to deviate from the usual provisions of the law.Many would consider the solution suggested by the off-hire provisions to be unreasonable. The charterer has received the remuneration to which it was entitled under the contract, being the freight for the cargo to Japan; however, it is not required to pay an equivalent amount of the agreed remuneration, being the charterhire for the time such a voyage would take under normal circumstances. Such a conspicuous breach of the principle of simultaneous exchange of performances seems unwarranted and unjust. Jantzen: Godsbefordring til Sjøs 2nd ed. (1952) page 392 for example, finds the result "so unreasonable that it could not have been the intention". It is also appears that grounds of reasonability caused one of the five judges in the Westfalia case, Lord Bramwell, to dissent and disallow the shipowner's claim for full charterhire for the voyage under tow. He states, inter alia (see (1891) A.C. 48 page 62):"… when there is no loss of time in consequence of that breakdown that is no total loss though a delay, then hire shall be paid. That is the meaning I attribute to this contract. It seems to me to be the ordinary mercantile and reasonable meaning: when you get the benefit of the ship you shall pay for its hire."He expands on this view in the conclusion of his judgement (supra. page 63):"The substantial matter to my mind is that the charterer has got the benefit of the carriage of his goods in that ship from Las Palmas to Harburg, and ought to pay for it."

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Similarly in the Herman Wedel Jarlsberg judgement, it would appear that the interpretation was based on a desire to achieve a reasonable result. The Norwegian Court of Admiralty stated (ND 1914.406 at pages 407-408) that:"the provision (appears) naturally to have to be understood to the effect that the charterhire only ceases to be payable for the time which is really lost. Otherwise the charterer would make a direct profit.”The Supreme Court reached the same result as the Court of Admiralty, but gives as its exclusive reason the fact that it read the clause in a manner which deviates from that which is immediately suggested by its wording. The leading judgement expressed this as follows (ND1915.168 pp169-170):"I read…the expression ‘from the commencement of the relevant breakdown or damage’ as meaning the same as if the provision had been thus formulated: ‘Immediately upon commencement of the time when the relevant damage resulted in a delay to the voyage.’"3. The off-hire clause under consideration here is not a tailor-made provision, nor is it a new and untested provision. The Clause is contained in standard charterparties and has been in use in this or similar form for a very long time (for example, the Westfalia judgement related to a charterparty entered into in 1887). This puts the question of interpretation in another perspective than that described in Section 2 above. The fact that the charterparty was drafted on the basis of English/American law but is to be construed in accordance with Norwegian law, creates further problems.In the case of a number of standard formulations, it is the fact that the parties have unequal bargaining positions that creates problems of interpretation. When the weaker party is forced to use a formulation that is considerably more advantageous to the other party, the judge will often seek to re-address some of the balance by way of interpreting the clause strictly against the interests of the stronger party. This is not the situation in the present case; as is usual in chartering cases, the parties in this charter relationship must be regarded as having been in equal bargaining positions. The problem lies elsewhere: where charterparties and similar contracts are entered into on the basis of detailed printed standard forms (standard terms), the contracting parties will often have a fairly imperfect knowledge of the specific provisions of the form. They will probably have an opinion as to the form's overall general quality and character but will not have gone into detail in respect of the many and often complicated clauses, much less thought about the effect of these clauses in the various situations which can arise in the course of the contract period. Accordingly, it is not possible to arrive at an interpretation based on what the parties intended or desired with the clause in question.Accordingly, the clause must be interpreted on the basis of the drafter's actual or assumed intention as the same appears in the form's commentaries, in the history of the form, etc. The parallel of using legislative history when interpreting legislation is obvious. Standard terms and conditions often have the same effect as if the contract were governed by non-mandatory rules of law, and so often set aside non-mandatory rules of law. A well-known example is the Norwegian Marine Insurance Plan, a comprehensive private set of regulations, which is, for all intents and purposes, authoritative in Norwegian marine insurance law. The commentary to the (current) Norwegian Marine Insurance Plan of 1964, page 3, also appears to be in the character of a supplementary source of law. To exemplify the courts' use of the Plan's commentary as an aid to interpretation, reference is made to ND 1956.318 (Norwegian Supreme Court), Bandeirante, at page 321, ND 1956.323 (Norwegian Supreme Court), Pan, at page 326, and ND 1969.49 (Norwegian Supreme Court), Grethe Solheim. In ND 1979.231, M/V "Wingull", at page 257, the court of arbitration built upon the commentary to the so-called Form 188. Reference is also made to ND 1973.323, M/V “Orator”, at pages 331-332. In ND 1925.523, Supreme Court Judge Bauermeister even subjected the Supreme Court's majority to oral evidence from the drafters of the standard form, as to what they had intended

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to achieve with their formulations, and this in spite of the fact that it related to a standard contract (Gencon) which had been unilaterally drafted by shipowners' organisations (criticism Brænne and Sejersted: Hydro-charterparty (1949) pages 138-139, and Brækhus, Sjø og Land (1968) pages 246-247).In the present case, no commentaries or other preparatory works to the Texacotime 2 form have been presented. However, it is still possible to say with great certainty what the drafters of the form intended and wanted, insofar as it relates to the question before us in the present dispute. The form has clearly been prepared by expert maritime lawyers and on the assumption that either English or American law would govern the contracts. When the drafters formulated the charterparty's clause 9 off-hire provision, more or less word-for-word in the form of that found in the Westfalia case, there can be no doubt that they intended to follow the solution arrived at by the House of Lords in that case. The Westfalia decision, subsequently followed by the Court of Appeal in Tynedale S.S. Co. -v- Anglo-Soviet S. Co. 54 ll. L. Rep. 341 (1936), is one of the leading precedents on this subject and is carefully cited in all of the English standard works on chartering (see for example Carver's Carriage by Sea, 13th ed. (1982) pp 1251-1252. Scrutton on Charterparties, 18th ed. (1974) pp 363-366 and Wilford-Coghlin-Healy-Kimball: Time Charters, 2nd ed. pp. 245 and 248. See also, Poor on Charter Parties and Ocean Bills of Lading, 5th ed. (1975) pp.38-39, which shows that the Westfalia decision is also followed in American practice.The drafters of the Texacotime 2 charterparty must also have known that several standard time charterparties have emerged with net time loss provisions (causation clauses) including the oft-used dry cargo charterparties Baltime 1939 (see clause 11) and Produce 1946 (see clause 15). Mention can be made of certain tanker charterparties with net clauses, such as Esso Time 1969 (clause 11), Intertanktime 80 (clause 20), Mobiltime (clause 7(a)) and STB Time (clause 11 (a)). Texaco 2's drafters nevertheless chose a gross clause. The same choice was also made for the Beepeetime 2 (clause 23) and Shelltime 3 (clause 21). There can be no doubt that this was a matter of choice between alternative solutions.4. Against the background of the drafters' intention, an interpretation of Texaco 2's off-hire clause must clearly be in the defendant's favour. A more restrictive interpretation is not possible: the drafters have made a conscious choice between two alternative solutions and worded the clause in a manner that shows clearly the favoured alternative. If English law had governed the charterparty of 25 March 1976, it is quite clear that the plaintiff's freight claim would not have succeeded. However, the parties have chosen Norwegian law to govern the charterparty (see clause 52). The Westfalia judgement, which is of central importance to the interpretation of the clause, is an English judgement, and as such is not binding on Norwegian courts. Before Norwegian courts it is considered more natural to refer to the judgement of the Norwegian Supreme Court in the Herman Wedel Jarlsberg case, which in this case would result in a decision in favour of the plaintiff. Does this mean that the dispute must have a different result pursuant to Norwegian law than it would pursuant to English law?It is the majority opinion that this question must be answered in the negative. If one accepts that a standard form governed by Norwegian law must be construed in accordance with the drafters' clear assumptions, an interpretation of the off-hire clause will lead to a solution without the necessity of referring to background rules of law, be they English or Norwegian. The Wesfalia judgement is of relevance, not because it is an expression of English law, but because it clearly forms the background for, and thereby gives a meaning to this clause.The judgement of the Norwegian Supreme Court in the Herman Wedel Jarlsberg case cannot lead to a different solution. The court made a specific interpretation of the off-hire clause in question, clearly influenced by the desire to reach a reasonable result, but without referring to the clause's Anglo-Saxon roots. Given the development that has taken place in contract terms since 1915, such an interpretation cannot be correct today. Off-hire clauses of the net-type

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have been included in a series of forms, and have in principle followed the solution favoured by the Norwegian Supreme Court in 1915. The Baltime charterparty, which in its 1912 and 1920 editions had a gross-clause, was drafted with a net-clause in its 1939 edition. As mentioned above, several tanker time charterparties have also included a net clause. However, the gross-clause continues to be used, inter alia, in Texacotime charterparties, in respect of which, this dispute relates. This fact is of vital importance to today's interpretation of the provision.The shipowner cannot succeed either with its claim that the charterparty must be construed in light of, and possibly be supplemented by, the Norwegian Maritime Code's §144.2, which provides instructions for calculating a net time loss. There must be some opportunity to supplement an unclear or incomplete charterparty provision with the more generally formulated rules in the Norwegian Maritime Code's chapter 5, cf. ND 1950.398, M/V "Karmøy". In the current dispute, however, there is no such obscurity or incompleteness. On the contrary, the wording of the clause shows a clear election of a solution and the solution is one that differs from that of the Norwegian Maritime Code. In such a case the non-mandatory law must be set aside.5. In the Westfalia judgement, the shipowner was awarded charterhire for the time the vessel was awaiting discharge in Harburg "because at that time his vessel was efficiently working; the working of the vessel was proceeding as efficiently as it could with reference to the particular employment demanded of her at the time" (Lord Halsbury (1981) AC 48 at page 57). When the off-hire clause in the current charterparty is construed in favour of the charterer on the basis of this judgement, it would also appear to be natural to include the limitation referred to here, in favour of the shipowner - in the opinion of the English judge the result in both instances is a result of the same point of interpretation. It is not claimed that the Arica's engine breakdown in any way made the discharge of the cargo of coal in Nagoya and Kimutsu more difficult; discharge took place in a total of 3 days and 4 hours. The shipowner is accordingly awarded charterhire for this period, which at a rate of USD 13,611 per day, equals USD 43,102. In addition to this, there is interest in accordance with the shipowner's claim, in respect of which the charterer has not raised any objection. Otherwise the shipowner's claim for charterhire from the charterer must fail.6. Given that the “Arica” is deemed to have been off-hire for the whole duration of the voyage to Japan, the shipowner's claim for reimbursement of the saved bunker expenses cannot succeed. Pursuant to the express provisions of the charterparty as set out in clauses 9 and 19, the charterer is not obliged to pay for the bunkers that are used during periods of off-hire. Accordingly, the charterer does not have any savings in this period as a result of the fact that the vessel under tow used less bunkers than it would normally use. The majority need not consider to what extent the claim for reimbursement would have succeeded if the shipowner had succeeded in its claim for charterhire for the period of the voyage. As stated above, the shipowner is entitled to charterhire from the time the vessel was discharging in Japan. There is no question of the owner being entitled to reimbursement of the saved bunker expenses for the same period, since no saving is alleged to have been made in this period.

7. Minority, Supreme Court Attorney Hans Peter Michelet, states as follows:It is clear that the off-hire clause in question is aimed at a so-called "gross-calculation", i.e. that it aims to preserve the result achieved by the Westfalia judgement. It is also clear that, seen from the perspective of the authors of the charterparty, this clause is a definitive choice between several types of off-hire clauses. However these authors, at the time of preparing the form of charterparty, had in mind to protect the interests of the charterers. This is not an "agreed" or "adopted" form of charterparty.

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In spite of the fact that there exists relatively clear English precedents and the maintenance of the clause must be seen in light of this, it is my opinion that this should not prevent Norwegian law interpreting the clause independently. There are several areas within the law of charterparties where the Norwegian and English understanding of wording in a charterparty differ, notwithstanding the existence of an unambiguous English precedent which, under English law, must form the basis for interpretation of such wording. In this way, words such as "punctual and regular payment" and the resultant right of withdrawal of the vessel would probably be construed differently in Norway than in England. See in this respect ND 1974.186, M/V "Kingsnorth", where English precedents were relied upon without success.The off-hire clause presently under consideration is retained in certain tanker charterparties. However the fact that any oil companies, given their charter interests, have chosen to retain a clause which is advantageous to them and that this has again been reflected in established English precedents, is not in my opinion determinative if one is of the opinion that this precedent or interpretation does not accord with a Norwegian sense of justice. This would apply particularly if one were of the opinion that the Westfalia case, which is the source of this precedent, would have been decided differently in Norway. It is precisely the fact that the parties deviated from the printed text of the charterparty by expressly providing for arbitration in Oslo and submitting to Norwegian law, that leads me to the view that the parties intended that a Norwegian legal ruling should govern their relationship. Neither of the parties preferred the Texacotime form of charterparty because of its particular off-hire clause. In the main hearing, both parties expressly confirmed that there was no conscious choice on this issue.The difficulty under Norwegian law is then to decide how far to follow the strict rules of interpretation of contract terms laid down in English law. I think several situations call for doing so, e.g. in a situation where there has been a deviation resulting in the vessel being brought to a location closer to the destination port and this improved location is again at the disposal of the charterer. Similarly, the clause appears to preclude any claim by the shipowner to be credited for a voyage to a port for repair, in a situation where the charterer, after the repairs have been completed, actually takes advantage of the vessel's new position, by loading in the port of repair. The shipowner would then hardly be supported in the view that the journey to the relevant port has actually benefited the charterer.Nor do I consider the fact that a charterer realises a profit by avoiding payment of charterhire to be a decisive factor. If, for example, the freight in a particular situation is payable after discharge in the destination port and, due to damage to the vessel, the cargo is forwarded on another ship under the general average rules, the original vessel will presumably be off-hire in the period of repair and the charterer will avoid paying the charterhire it would normally have had to pay to earn its freight. Financially, this situation is very close to the current dispute.However, the unreasonableness of applying the wording of the clauses appears to increase if during a voyage the vessel should suffer a breakdown of, for example, one or more of its cylinders, which causes a slight reduction in the vessel's speed. To agree that this amounts to full off-hire even if only a fraction of the total voyage time is lost, could appear objectionable. The judgement of the Norwegian Supreme Court in the “Wedel Jarlsberg” case shows that the Supreme Court shared this view at that time.A strict interpretation can also seem equally unjust if the vessel's services are performed by way of outside means. This could be the situation at discharge where the shipowner arranges for the use of shore cranes, instead of the vessel's own cranes, which are defective, or in a case where the vessel has been towed, as in this case. From a Norwegian perspective, it is probably natural in such situations to say that the vessel is in an "efficient state to resume her service" even if the vessel itself does not perform the service. Further, Frisak, at page 53, appears to suggest that a purely gross-result in such cases would be unreasonable from a Norwegian point of view (see however, page 27).

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In these situations, I also have difficulty understanding the differentiation made in the Westfalia case between the time the vessel is in tow and the time the vessel is discharging. The wording appears (at least in the present charterparty) to ensure that it is the original damage that is to be repaired, not simply that the vessel is in a position to render its services "as immediately required". If this is the criterion, the vessel could be considered to be on-hire if it had to lie and wait while damage was repaired in any case. But then we have come very close to basing the matter on the significance the damage in question has actually had.Even if I accept the difficulty in drawing a clear line in all cases, it is evident to me that in a case like the present one, where performance was effected by other means, it would be natural under Norwegian law to supplement the off-hire clause as it now stands, with the main rule in the Norwegian Maritime Code §144.2, whereby the shipowner would be awarded charterhire for the time a normal voyage would have taken.Having heard the parties to this dispute, I also think that this was the original understanding of the parties. In a telex of 19 February, the shipowner stated that "we (will get) timecharter hire for the time the voyage would normally take". Accordingly it was an expressly stated and material assumption for the offer made by the shipowner that the charterhire would be earned for the period of a normal voyage. The fact that the shipowner did not ask for confirmation that Høegh was in agreement is, in my opinion, to be blamed on the fact that the shipowner assumed at that time that its right to charterhire was obvious, and that Høegh also shared this understanding at that time. If at this point, Høegh had a different understanding, it would have been very natural for Høegh to say so. This would have been a good basis for Høegh to reject the shipowner's claim to be reimbursed for the saved bunkers, which brought about the current dispute concerning the right to charterhire.If one assumes that the vessel was on-hire for the duration of an assumed normal voyage, the question arises whether the charterer should also compensate the owner for the bunkers it saved, since the vessel was towed to the port of discharge.Personally, I find this claim to be of a different nature than that for charterhire. There is no basis for this claim in the charterparty, nor does it arise as an automatic consequence of the fact that the vessel is assumed to be on-hire. While it is agreed that the charterer shall pay the bunkers (and other expenses) when the vessel is on-hire, this is an allocation of costs, and does not mean that payment of any costs (in this case for bunkers), which have not accrued, can be demanded from the other party. The question arises not infrequently, when a vessel travels at reduced speed due to damage to the vessel, and at the same time bunker consumption decreases. That "additional time" results in off-hire, cannot be seen as giving the shipowner any claim based on the charterparty, for a credit of what the charterer saves.The only basis on which one could possibly admit such a claim would appear to be where there is an unjustified enrichment. It may be argued that it is unreasonable that the charterer should benefit from the savings when the owner bears the costs, which the charterer would normally bear, and which may occasionally result in freight being earned.In this respect, it would appear that one could begin by asserting that the shipowner did not have any actual costs in respect of bunkers. Accordingly, there is no direct defrayal of the expenses allocated by the charterparty. In addition, there is the fact that the substitute expense, which the charterer incurred for towage instead of bunkers, would be taken into account in calculating a general average claim. It is therefore difficult to establish to what extent the owner has made a sacrifice that resulted in savings to the charterer. A general rule that the parties to a time charterparty are to be placed in the financial position they would have been in, had normal performance taken place, is hardly acceptable. In this way the charterer would, in certain cases, have a claim for the full freight even if the vessel sank on the way, although this would not appear to lead to any claim for restitution from a shipowner against a time charterer.

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For the reasons stated above, it is my conclusion that the shipowner's claim for compensation for the bunkers, which the charterer has saved, should not succeed even if the vessel is considered to be on-hire.Since I am in the minority, I do not form any conclusions apart from what has already been stated above.8. The shipowner is only awarded part of the amount claimed. However, the arbitrators are of the opinion that the case has been of such a fundamental and dubious nature that each of the parties should bear their own costs and pay half of the fees and expenses of the court of arbitration.Judgement1. Defendant Leif Høegh & Co. A/S is found liable to pay to the plaintiffs, Skibs A/S Aino, A/S Viva and Skibs A/S Viator, USD 43,102 plus interest at the rate of 15% p.a. from 28 July 1982 to the date of payment in full, either in the aforementioned currency or Norwegian Kroner, calculated at the rate of exchange prevailing at the time of payment.2. Costs are not awarded.3. Each of the plaintiffs and the defendant are jointly and severally liable to pay the fees and expenses of the court of arbitration as separately specified. As between them, each of the plaintiffs and the defendant shall bear one half.4. Payment is due within 14 days from the date of the arbitration award.

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ND 1991 176 NH (Walker)

SUMMARY: A shipyard that had overhauled the fishing vessel “Walker” claimed to have retained a possessory lien pending the discharge of outstanding invoices for the repairs, even though the owner had been permitted to use the vessel for some hours for a short cargo voyage. Possession was regained after approx. 48 hours. Following the foreclosure sale of the vessel, a dispute arose between the shipyard and the vessel’s mortgagee regarding the division of proceeds from the foreclosure sale. – The Court found in favour of the mortgagee. It was of no consequence that the voyage could be perceived as a ‘trial run’ and that the shipyard had not completed the work. There was no-one from the shipyard onboard, and the main purpose of the trip was transport.

VENUE: Interlocutory Appeals Committee of the Supreme Court, 25 April 1991

PARTIES: O. Marhaug Slip og Mek. Verksted A/S (The Law Firm of Robert Robertsen represented by attorney Olav Farstad) vs. the Government Fisheries Bank (attorney Trond Mentzen).

AUTHORS: Members of the Court: Supreme Court Judges Skåre, Hellesylt and Schei.

In the period from 4 July 1989 to 27 October 1989, the fishing vessel “Walker” was overhauled by O. Marhaug Slip og Mek. Verksted A/S at a total cost of NOK 762 644. Pursuant to the request of the Government Fisheries Bank, the fishing vessel “Walker” was subject to foreclosure sale, and after a second auction, an offer of NOK 1 101 000 from a limited company that was being formed with the previous owner, Per Ole Benjaminsen, as principal shareholder, was ratified by a ruling at the Lofoten Court of Enforcement on 13 September 1990.

In connection with the division of the auction proceeds, a dispute arose between O. Marhaug Slip og Mek. Verksted A/S and the other creditors regarding the extent to which O. Marhaug Slip og Mek. Versted A/S had a possessory lien to back its claim. On 28 September 1990, the Lofoten Court of Enforcement issued a ruling that O. Marhaug Slip og Mek. Verksted A/S had retained its possessory lien.

The Government Fisheries Bank filed an interlocutory appeal to Hålogaland High Court against the Court of Enforcement ruling in favour of O. Marhaug Slip og Mek. Verksted A/S and Sparebanken Nord-Norge. Hålogaland High Court issued a ruling on 18 January 1991 that concluded:

“1. O. Marhaug Slip og Mek. Verksted A/S does not have a possessory lien against the fishing vessel “Walker” in relation to the Government Fisheries Bank.

2. O. Marhaug Slip og Mek. Verksted A/S will pay to the Government Fisheries Bank, legal costs in the amount of NOK 12 103 for the Court of Enforcement and High Court hearings, within two weeks following the service of this ruling.

The details of the case are evident from the Court of Enforcement and High Court rulings.

O. Marhaug Slip og Mek. Verksted A/S timely filed an interlocutory appeal with the Interlocutory Appeals Committee of the Supreme Court against the High Court ruling in favour of the Government Fisheries Bank, with reference to the misinterpretation and misapplication of §247 of the Maritime Code. O. Marhaug Slip og Mek. Verksted A/S has

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argued that a temporary relinquishment of possession of two days does not result in the loss of the possessory lien. It was wrong of the High Court to fail to give weight to material considerations and reasonableness when interpreting the Act. The shipyard and Benjaminsen had an agreement that the fishing vessel “Walker” would be returned immediately to the yard in Svolvær after the short trip to Kabelvåg to collect two cranes. It should be emphasised that Benjaminsen deceitfully failed to fulfil his side of the agreement. The demand to restore possession was made immediately, and possession was in fact restored within 48 hours. Moreover, the Government Fisheries Bank was fully aware that the shipyard had a possessory lien on the fishing vessel “Walker”. None of the mortgagees will suffer losses in connection with the possessory lien being upheld. Notwithstanding, the case must give rise to enough doubt that legal costs should not have been awarded.

O. Marhaug Slip og Mek. Verksted A/S has made the following demand:“1. That the Hålogaland High Court ruling of 18 January 1991 on case 96/90 B be

set aside. 2. That O. Marhaug Slip og Mek. Verksted A/S be awarded legal costs.”

The Government Fisheries Bank has responded to the interlocutory appeal and, with reference to the decision rendered in RG 1978 337, pointed out that a possessory lien is intricately tied to the possession of the vessel and that an agreement between the shipyard and the shipowner cannot modify the possession requirement. In addition, it is disputed that there was in fact any agreement between the shipyard and the shipowner regarding the return of the vessel to Svolvær once the cranes had been loaded at Kabelvåg. There can be no room for evaluations of reasonableness. Strong material considerations dictate that the conditions for a possessory lien must be strictly practised out of consideration to, inter alia, other lien holders. It is disputed that there are any grounds to modify O.Marhaug Slip of Mek. Verksted A/S’s liability for costs.

The Government Fisheries Bank has made the following demand:“1. That the Hålogaland High Court ruling of 18 January 1991 be upheld.2. That O. Marhaug Slip og Mek. Verksted A/S be ordered to pay the legal costs

for the Interlocutory Appeals Committee of the Government Fisheries Bank.

The Interlocutory Appeals Committee of the Supreme Court notes that the High Court decision was rendered following an interlocutory appeal, and that the Committee’s jurisdiction is therefore limited, cf. §404 of the Civil Procedures Act. In the present case, the interlocutory appeal relates to the High Court’s interpretation and use of §247 of the Maritime Code. Pursuant to §404 no.3, however, the Committee can only examine the legal interpretation – not the utilisation.

The High Court finds that the Appellant allowed the vessel’s owner to use the vessel to collect cargo. In the High Court ruling, it is further stated:

“Notwithstanding that the passage from Svolvær to Kabelvåg is short, estimated at about 2 hours, and even though there was an agreement with the shipyard that the vessel would be returned immediately to Svolvær once the cranes had been loaded, the voyage cannot be characterised as a trial run. This must be the case, even though, in effect, Benjaminsen had the opportunity to test the vessel at sea during the voyage.

The issue of whether the possessory lien continued to exist, must be linked to objective and provable factors, and thus, the determining factor must be that no-one from the shipyard accompanied the vessel, and that the primary purpose of the voyage was clearly to collect cargo at Kabelvåg. The fact that it was not the shipyard’s intention to relinquish or forfeit the possessory lien cannot be determinative in such instances. Nor can any significant weight be given to the fact that there were still some minor repairs to be carried out on the vessel, that the guarantee certificate and trial-run statement were not signed, and finally that

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the vessel’s seaworthiness was questionable. In addition, the fact that Benjaminsen appears to have stayed in Kabelvåg longer than expected cannot be given undue importance in this case.”

The Committee does not find that the High Court ruling is based on a misinterpretation of §247 of the Maritime Code.

Accordingly, the interlocutory appeal must be dismissed, and the Appellant must – pursuant to the principal rule in the first paragraph of §180 of the Civil Procedures Act – be ordered to pay the legal costs for the interlocutory appeal. The amount is set at NOK 2 000.

The ruling is unanimous.

Conclusion:The interlocutory appeal is dismissed.O. Marhaug Slip og Mek. Verksted A/S will pay legal costs to the Government

Fisheries Bank in the amount of NOK 2 000, for the Interlocutory Appeals Committee of the Supreme Court, within 2 weeks following the service of this ruling.

From the High Court ruling:……

The High Court’s comments:There is agreement between the parties to base the settlement of foreclosure proceeds

on the assumption that the shipyard’s possessory lien, to the extent that this is still valid, was not forfeited by the fact that Per Ole Benjaminsen arbitrarily took possession of the vessel on 15 September 1990.

The sole issue is what significance the fact that the yard let Benjaminsen use the vessel for a voyage to Kabelvåg on 2 November 1989 and only regained possession of the vessel two days later, has to the shipyard’s possessory lien.

Per Ole Benjaminsen had extensive repairs carried out to his fishing vessel, the fishing vessel “Walker”, by O. Marhaug Slip og Mek. Verksted A/S, when the vessel was in the aforesaid shipyard in autumn 1989. The shipyard issued four invoices, dated 1 October, 5 October, 25 October and 27 October, for the repair costs totalling NOK 762 644, 30. In addition, it is evident from the statement in the pleading dated 9 April 1990 from attorney, Olav Farstad, to the Lofoten Court of Enforcement, that the shipowner paid on account the sum of NOK 167 710 on 30 August 1989. A further NOK 152 718 was paid on account on 21 November 1989, so that the principal amount outstanding on the aforementioned date was NOK 442 000. It is thus clear that when the vessel left the shipyard around 2pm on 2 November 1989, the shipyard had a legal right to retain possession as security for the outstanding claim, which at that point totalled NOK 600 000. Furthermore, it is clear that the vessel left the yard with the consent of the manager, and that no-one from the shipyard accompanied the vessel when she departed Svolvær. The issue in this case is therefore whether the shipyard forfeited its possessory lien.

Pursuant to §247 of the Maritime Code, a possessory lien requires that the shipyard retain the vessel in its possession. Exceptions can be made for very short breaks in possession on a case by case basis, without a shipyard forfeiting its possessory lien. Reference is made to Omsetning og kreditt, Part 2, by Sjur Brækhus, p. 523 ff.

According to the actual details available regarding the vessel’s absence from the shipyard, the High Court is of the view that this cannot be deemed to be such a short break that it does not affect the shipyard’s possessory lien. There can be no doubt that the vessel sailed from Svolvær to Kabelvåg to pick up two wharf cranes that were to be transported to Bleik on Andøya. Notwithstanding that the passage from Svolvær to Kabelvåg is short, estimated at about 2 hours, and even though there was an agreement with the shipyard that the

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vessel would be returned immediately to Svolvær once the cranes had been shipped, the voyage cannot be characterised as a trial run. This must apply, even though, in effect, Benjaminsen had the opportunity to test the vessel at sea during the voyage.

The issue of the possessory lien’s continued validity must be linked to objective and provable factors, and thus, the determining factor must be that no-one from the shipyard accompanied the vessel, and that the primary purpose of the voyage was clearly to collect cargo at Kabelvåg. The fact that it was not the shipyard’s intention to relinquish or forfeit the possessory lien cannot be determinative in such instances. Nor can any significant weight be given to the fact that there were still some minor repairs to be carried out on the vessel, that the guarantee certificate and trial-run statement were not signed, and finally that the vessel’s seaworthiness was questionable. In addition, the fact that Benjaminsen appears to have stayed in Kabelvåg longer than expected cannot be given undue importance in this case. With regard to the possession requirement, Sjur Brækhus states on p.266 of Arbeider fra sjø og land that “Borderline cases will easily arise in instances where it is doubtful whether the shipyard can be said to have possession; the determining factor must be whether the shipyard has adequate possession of the vessel so that it can effectively prevent the shipowner from removing the vessel.” This was clearly not the case during the voyage to Kabelvåg.

As a consequence thereof, the shipyard cannot claim to have a valid possessory lien in relation to the Appellant, the Government Fisheries Bank, for any parts of the claim that was filed with the Court of Enforcement.

Pursuant to §247 of the Maritime Code, as the right to retain possession pending the discharge of invoiced repair costs prior to 2 November 1989 is no longer valid, no new legal possessory lien arises for wharfage for the period after Benjaminsen voluntarily returned the vessel on 4 November 1989. It has not been stated whether any repairs were carried out after this date, and the shipyard has in any case not argued that a possessory lien arose based on such a claim.

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ND 1996 238 NH (Loran)

KEY WORDS: (42) “Peril” as a condition for salvage money, cf. §224 of the Norwegian Maritime Code of 1893 and §441 of the Norwegian Maritime Code of 1994 – the issue concerning peril must be evaluated objectively.

SUMMARY: When fishing near Shetland, the fishing vessel “Loran” developed engine trouble. Following a radio call requesting assistance, the fishing vessel “Viknafisk” reached the “Loran” and commenced towage; the tugboat, “Mega Mammut”, later assumed towage.

It was later established that the engine of the “Loran” had sufficient remaining power to have ensured the vessel’s safe return to harbour without assistance, and the owners therefore claimed that “peril” – the criterion for salvage, was not present.

The Norwegian Supreme Court concluded, with 1 dissent, that only vessels in objective peril can be subject to salvage. Salvage money can therefore not be awarded, only remuneration amounting to NOK 100 000 for assistance.

VENUE: The Norwegian Supreme Court, 18 June 1996

PARTIES: K/S A/S Loran (attorney Erik Blaker) vs. Per Ola Valø for the owners of M/S Viknafisk (attorney Erling Kr. Engelsen – test case for admission as Supreme Court Attorney)

AUTHORS: Members of the Court: Supreme Court judges Gjølstad, Bugge, Schei, Gussgard and Sinding-Larsen.

Judge Gjølstad: The case concerns conditions for salvage money, interpretation of the criterion “vessels that are … in peril” in the Norwegian Maritime Code’s provisions pertaining to salvage.

On the night between 20 and 21 February 1993, the fishing vessel “Loran”, owned by K/S A/S Loran, developed difficulties with her main engine on her way home to Norway after fishing near Shetland. The rpm dropped, the exhaust temperature rose and engine efficiency was reduced. The vessel was approx. 10 nautical miles north-west of Shetland, and a strong gale was blowing from the north-west.

Several Norwegian fishing vessels were also returning to Norway, including the “Viknafisk”, which was called over the radio and asked to render assistance. In addition, contact was made with the manufacturer of the main engine in Langevåg, and the tugboat “Mega Mammut” was called from Norway. The “Viknafisk” reached the “Loran” after a couple of hours and towage was established. The “Mega Mammut” later took over and towed the “Loran” to Måløy.

A disagreement arose regarding the compensation the “Viknafisk” was to receive for the towage. The owner of the fishing vessel, Per Ola Valø, filed a complaint with the Sunnmøre High Court on 3 December 1993, against the owners of the “Loran”, claiming salvage money in the maximum amount of NOK 700 000. It was claimed that the situation was extremely perilous for the “Loran” when towage was established. The owners of the “Loran” disputed this and argued that they should be required to pay only normal remuneration for the assistance, amounting to NOK 100 000, as opposed to salvage.

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The Court – which included lay judges with relevant specialist knowledge – rendered judgement on 21 June 1994, with the following conclusion:

“1. Per Ola Valø for the owners of the M/S “Viknafisk” shall be awarded salvage money amounting to NOK 300 000, with 18% interest per annum, from 4 June 1993 to the end of the year, and 12% interest per annum, from 1 January 1994 until such time as payment is effected.

2. The owners of the M/S “Loran” shall pay legal costs to Attorney Erling Kr. Engelsen for Per Ola Valø and the owners of the M/S “Viknafisk”, totalling NOK 84 004, plus the standard court fee and court costs totalling NOK 12 166.

3. Payment falls due within 2 weeks of the service of this ruling.”

The High Court stated that if, in objective terms, it was true that the “Loran” could have continued the voyage under her own steam, the vessel was not in peril and the conditions for salvage money were not fulfilled. Following a concrete assessment, however, the High Court found that the vessel was on the verge of total engine failure – and in peril – when towage was established.

Following an appeal by the owners of the “Loran”, the Frostating High Court – which also included lay judges with relevant specialist knowledge –rendered judgement on 7 November 1994, with the following conclusion:

“1. The Chairman of the Board for K/S A/S Loran shall pay Per Ola Valø, 7900 Rørvik, salvage money totalling NOK 200 000, with 18% interest per annum, from 4 June 1993 to the end of the year, and 12% interest per annum, from 1 January 1994 until such time as payment is effected.

2. Point 2 of the High Court ruling shall be upheld.3. K/S A/S Loran shall pay Attorney Erling Kr. Engelsen, 6001 Ålesund, for Per Ola

Valø, legal costs for the High Court amounting to NOK 65 097, in addition to half the High Court costs for lay judges.

The judgement was issued with dissent from one law judge and one lay judge.The District Court’s majority noted, among other things:

“It is correct, as pointed out by K/S A/S Loran, that an objective assessment shall be made, but not in the form of a direct reading of how the people onboard the “Loran” actually perceived the situation then and there, but how ordinary people with expert knowledge would reasonably perceive the situation.

In retrospect, based on the expert reports submitted to the District Court, it would seem evident that the “Loran” would have managed to continue the voyage alone. The engine performance was reduced, as one of the turbo injectors was damaged and one of the cylinders did not function. The power was, however, sufficient to ensure the “Loran’s” safe return to port, even to Norway, albeit at low speed, under her own steam, without repairs.……

If the “Loran” had broken down completely, there seems to be agreement between the parties that there was a risk that the “Loran” would drift ashore and become grounded. The Court accepts this. The wind was blowing strong to gale force from the north-west, and land lay approx. 10 nautical miles to the south-east, increasing the danger of shipwreck. There was no possibility of anchorage.

As the crew onboard did not know what was wrong with the engine, but experienced the aforementioned symptoms and contacted supposedly knowledgeable people, but received

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no explanation, it would have been irresponsible in the given situation not to accept assistance from the “Viknafisk” in the form of towage. …”

The minority found that the assistance rendered by the “Viknafisk” to the “Loran” does not comply with the Norwegian Maritime Code’s provisions pertaining to salvage.

………

I find that the appeal must succeed.The salvage money arrangement is a special, statutory institution in maritime law. The

purpose of the arrangement is to encourage salvage and thereby to safeguard assets. Salvage money is meant to be a reward and is not set according to the ordinary principles for remuneration of work performed. Another peculiarity is that salvage money can only be claimed if the salvage operation is successful. Claims for salvage money are secured by maritime lien.

The conditions for salvage money – what can be the object of salvage – was regulated by §224 of the Norwegian Maritime Code of 1893, and is applicable in this case. The provision has now been replaced by §441 of the Norwegian Maritime Code of 1994. The current provision has the same content as the former. The provisions are based on the Brussels Convention on Salvage of 1910. A new International Convention on Salvage was passed in 1989, but has not yet been ratified by Norway. The new convention contains no provisions relevant to the questions in this case.

Pursuant to §224 of the former Maritime Code and the new §441, anyone who “salvages a ship which has been wrecked or is in peril” has the right to salvage money.

The factual finding of the High Court – which must be assessed in light of the relevant legal interpretation – is that the “Loran’s” engine power, despite reduced performance, was sufficient to ensure the vessel’s safe return to port, without repairs or assistance. In objective terms, there was no peril. The legal question is whether it is determinative of the issue of salvage money, that viewed objectively, there was a peril, or – as found by the High Court – it is sufficient that ordinary knowledgeable people, acting reasonably would then and there have perceived the situation to be perilous.

In my view, the wording of the law indicates that objective peril must exist and I believe that the preparatory works support this view. In the Maritime Code Commission’s draft from 1890, in the comments to §224 on pages 285-286, it is stated that the condition for salvage money is “that an emergency situation is in fact imminent” and furthermore, that salvage money can only awarded “when the ship in distress is not able to save itself from that peril”. The criterion in §224 of the Code of 1893 was originally “in distress” before this was replaced by “in peril” in 1964, which entails a somewhat lower degree of danger. The amendment in 1994 was based on Recommendation II from the Maritime Code Commission, where similar views to those I referred to above in the Maritime Code Commission’s draft from 1890, are expressed on pages 13 –14.

In Norwegian and foreign maritime legal theory one can find commentaries stating that the peril must be real and shall be judged objectively, but the factual issues in the present case do not appear to be dealt with directly in Norwegian theory. The Appellant has made reference to a statement in a published foreign commentary, which states that, in accordance with the Brussels Convention, there must be an objective peril, as evaluated retrospectively, based on all the information submitted, see Enrico Vincenzini, International Regulation of Salvage at Sea, p. 54-55.

The theoretical and practical statements, to which the Respondent has referred, partially apply to the concrete assessment of evidence. The commentaries also partially appear

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to indicate a situation where there is uncertainty – both at the time and in retrospect – with respect to risk factors that could develop in any way. There may then have been a real peril, even though it did not materialise.

The Respondent has also made reference to real considerations. In my view, it could be argued that these considerations lend support to both interpretations. Excepting clear cases of salvage, I assume that at the time of assistance there will often be uncertainty as to whether the conditions for salvage money exist. I would also point out that both parties have expressed that this case is special in practical terms, as the “answer” has been found in retrospect.

Accordingly, I find that the Code must be interpreted to mean that a vessel that is not in objective peril cannot be the object of salvage. As I understand the provision, the institution of salvage thus only applies to vessels that are wrecked or in real peril. I therefore find in favour of K/S A/S Loran that they shall pay NOK 100 000 in line with what is offered as normal remuneration for such assistance. There has been no submission of evidence to the Supreme Court in connection with the sum of money and thus there are no grounds to set any other amount than that which is offered.

The appeal has been successful, however, the case has raised a principal question of interpretation of the Code, and in the given situation, I find that each of the parties shall pay their own costs for all courts.

I vote in favour of the followingRuling:

1. K/S A/S Loran shall pay Per Ola Valø, on behalf of the owners of the M/S “Viknafisk”, NOK 100 000, with 18% interest per annum from 4 June 1993 to 31 December 1993, and 12% interest per annum from 1 January 1994 until such time as payment is effected. The deadline for satisfying obligations is no later than 2 weeks following the service of the Supreme Court ruling.

2. Legal costs shall not be awarded for any proceedings.

Judge Bugge: I am in essence and outcome in agreement with the majority opinion. Judge Schei: I concur.Judge Gussgard: I concur.Judge Sinding-Larsen: I have reached an outcome different from the majority opinion.

A condition for salvage money is that the vessel that has received assistance has been wrecked or “in peril”. The question raised by this case is whether the judgement as to whether the vessel was “in peril” shall be based on the information available at the time when assistance was given, or whether determinative weight should be given to information that was not available at the time of assistance. The fact that in the event of disagreement, the decision as to whether there is a basis for salvage money must be made by the courts at a later time, cannot be determinative in this connection. It is rather a question of which information and evidence shall be used as the basis for the courts’ decision.

I cannot see that the wording of the Code or the preparatory works provides any guidance in this matter. The word “peril” as used in the Code, must be understood to mean a certain probability that an undesired event will occur, cf. Brækus: Bergning, p.8. Uncertainty as to the extent to which a vessel will cope is in itself a situation of peril, Brækus, p. 12.

In the Maritime Code Commission’s Recommendation of 1890, it is stated that salvage money can only be granted when the vessel in distress “cannot save itself from peril”. This can be interpreted to mean that salvage money shall not be awarded if in retrospect it can be proven that the vessel would have managed without assistance. This may, however, also be the situation in cases where there can be no doubt that salvage money shall be awarded. Thus, it must have been absolutely clear that salvage money would be paid even though the storm that threatened to drive the vessel aground later tailed off. Peril will therefore largely have to

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be judged – despite the wording in the preparatory works – on the basis of the situation at the time of assistance. The Appellant does not dispute this, but claims that there should be clear differentiation between cases where uncertainty must be acknowledged in retrospect – for example such as applies to wind and weather – and cases where it is impossible to gauge the real situation at the time of assistance, but where subsequent investigation shows that peril did not exist. I do not see that such a differentiation can be drawn from the preparatory works, which do not deal with the question at all.

In my view, the question as to whether the conditions for salvage are present should be assessed based on the information available to the navigators of the vessels involved. It is on the basis of this information that they have to decide which measures to take. There must, of course, as highlighted by the District Court, be an objective assessment of these conditions. But if the conclusion, based on the information available at the given time, is that there was a peril, the conditions for salvage money must be seen to be fulfilled.

It would, in my opinion, involve an unnecessary element of uncertainty if, when it can be confirmed that there was good reason to fear that engine failure could lead to an accident at the time of assistance, salvage money is denied because a subsequent mechanical investigation proved that the engine problems were not as serious as those involved had reason to believe at the time that assistance was rendered and received.

That the situation as it is perceived then and there should be determinative, is given some support in Helge Klæstad: Om bergning av skib, p. 16, and Kristian Thorbjørnsen: No cure - no pay, p. 38. I am, however, in agreement with the majority opinion in that general legal theory cannot be cited in support of a specific solution.

I find that point 1 of the High Court ruling should be affirmed. In line with the majority opinion, I find that legal costs shall not be awarded for any

proceedings.Following the vote, the Supreme Court rendered judgement in accordance with the

conclusion of the majority opinion.

(……)

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ND 1999 269 NH (Los 102)

KEY WORDS: (35) Salvage – peril criteria - §224, the Norwegian Maritime Code (1893)

SUMMARY: Finding: that the “Los 102” was exposed to such peril that the State, as owner of the pilot boat, is obliged to pay salvage money. What constitutes a peril under the Norwegian Maritime Code must be judged objectively, as the judgement specifies in several places. In the evaluation of evidence, considerable weight has been placed on the records made at the time of the salvage operation or immediately thereafter. (Dissent 4-1 regarding sum to be paid as salvage money. Amendment to High Court ruling, see ND 1997 339).

VENUE: The Norwegian Supreme Court, 27 January 1999

PARTIES: Møre og Romsdal Fylkesbåtar AS (attorney Bjørn Fr. Salvesen – test case for admission as Supreme Court Attorney) vs. the Ministry of Fisheries for the State (attorney Wenche E. Arntzen for the Attorney General).

AUTHORS: Members of the Court: Supreme Court judges Skoghøy, Broch, Matningsdal, Bugge and Tjomsland.

Judge Skoghøy: The case concerns a claim for salvage money for the salvage of a vessel. The central question in the case is whether the pilot boat, “Los 102”, on the night between 1 and 2 September 1993, was exposed to such peril that the State, as owner of the pilot boat, is obliged to pay salvage money for the assistance rendered by the high-speed craft, “Askepott”.

In the late evening of 1 September 1993, the pilot boat, “Los 102”, left Kristiansund to take the state-certified pilot, Eidar Iversen, out to the M/S “Condock III” at Griphølen, approx. 2 nautical miles east of Grip lighthouse, the fixed boarding point for pilots. The “Condock III” is a cargo vessel that was on her way to Verdal. The pilot boat was navigated by the master, Arnfinn Ødegaard, and the other crew member onboard was the pensioned master, Harry Jørgensen, who acted as a volunteer.

The pilot boat was procured in June/July 1993 at a cost of NOK 8 014 767 plus VAT. The boat measures a length over all of 16.50 metres and a beam 5.20 metres.

The power supply onboard the pilot boat is comprised of one 230-volt generator and three 24-volt systems (the 24-volt generator). The 24-volt generator supplies the helm, communication and navigation systems and propeller positioning, and powers the emergency lighting in the event that the 230-volt generator cuts off. The pilot boat is driven by two main engines with rotating propellers.

According to weather data from the Norwegian Meteorological Institute, on the night between 1 and 2 September 1993, there was, in the area, a moderate gale (14-15 metres per second) blowing from the west, with gusts of wind up to fresh gale force (17-18 metres per second). It was raining, visibility was poor and the sea was rough, with waves reaching 1.25 – 2.5 metres high.

The pilot boat reached the “Condock III” at around 2400 hours. As the pilot boat came alongside the “Condock III” so that Pilot Iversen could board the vessel, the 230-volt generator cut off, at the same time that the helm locked in a hard starboard position. Consequently, the pilot boat aborted the boarding attempt, and the propellers were released. Shortly thereafter, the pilot boat also lost power from the 24-volt generator and the boat was in total blackout. Though the engines were running, it was not possible to manoeuvre the pilot

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boat, and the boat therefore lay drifting with the wind and sea. The “Condock III” was too large to render assistance in those waters.

At approx. 0030 hours, the “Los 102” restored power to the 24-volt generator. The boat then regained control of the propeller regulation, the lights onboard came on and power was restored to the radar. However, the helm was still locked in a hard starboard position.

Prior to the restoration of power to the 24-volt generator onboard, the state-certified pilot, Iversen, had made contact with Ørlandet Radio at 0020 hours by means of his battery-powered VHF radio. At 0021 hours Ørlandet Radio called the rescue vessel, the R/V “Ada Waage”, which had passed Kvitholmen by Hustadvika at 2400 hours on her way north. The "Ada Waage" immediately set course towards the position where the pilot boat was located.

Onboard the high-speed craft “Askepott”, which is owned by Møre og Romsdals Fylkesbåtar AS (hereafter “MRF”), and which was berthed at Edøy, the crew heard on the emergency channel that the pilot boat was in difficulties. The master of the “Askepott”, Arne Iversen, contacted the Rescue Coordination Centre and informed them of his position, and that he had the engines running. Master Iversen told the Rescue Coordination Centre that he estimated that it would take the “Askepott” approx. 40 minutes to reach the pilot boat. It is recorded in Ørlandet Radio’s logbook that in a conversation between the “Los 102” and the Rescue Coordination Centre at roughly 0045 hours, it was decided that the “Askepott” should go to render assistance. The crew onboard the “Askepott” was comprised of the master, Iversen, and chief engineer, Helge O. Svenning.

Once power had been restored to the 24-volt generator onboard the pilot boat, the crew attempted to manoeuvre the boat, using the port-side engine, to position the bow so that the wind blew in from the front from starboard. The extent to which the crew in this way managed to regain control of the boat, is disputed by the parties.

It took longer for the “Askepott” to reach the pilot boat than originally estimated by Master Iversen. While the “Askepott” was on her way towards the pilot boat, the crew received a radio message from Harry Jørgensen, onboard the pilot boat, enquiring as to the whereabouts of the “Askepott”.

At 0140 hours, the “Askepott” spotted the pilot boat, and the towlines were in place by 0150 hours. The position of the boats at this point is disputed by the parties.

Once the “Askepott” had fixed the towlines onboard the pilot boat, the pilot boat was towed in the direction of Kristiansund. The hawser broke at 0215 hours. However, by this time, the R/V “Ada Waage” had arrived on the scene, and as agreed, the “Ada Waage” took over towage of the pilot boat towards Kristiansund. The vessels docked at Kristiansund at 0430 hours.

Once the “Ada Waage” had taken over towage, the “Askepott” discontinued operations and returned to Edøy. The vessel arrived back at Edøy at 0305 hours.

In order to establish the effect on the pilot boat’s manoeuvrability that having the helm locked in a hard starboard position had, Captain Alf Oddvar Giske took the “Los 102” for a test run on 13 November 1996. The test run showed that with the appropriate use of the starboard and port-side engines and the correct angle on the propeller wings, it was possible to manoeuvre the boat without any problem at a speed of up to 10 knots with the helm locked in a hard starboard position. The deviation off course during this test run was no more than 5 degrees, i.e. no more than roughly 2.5 degrees to either side of the desired course.

In a letter dated 21 March 1994 to the Norwegian Coastal Authorities, Master Arne Iversen submitted a claim for salvage money on behalf of the “Askepott”. This claim was backed by MRF as owner of the “Askepott”, in a letter dated 27 January 1995. The Norwegian Coast Directorate rejected the claim in a letter dated 10 July 1995. The Directorate said, however, that it was willing to pay for the “Askepott’s” efforts at normal towing rates. This was not accepted by MRF. MRF filed a complaint on 1 September 1995 for civil action

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against the Ministry of Fisheries for the State, with a claim for salvage money amounting to a maximum of NOK 400 000, with interest on overdue payments from 14 February 1995. Oslo City Court rendered judgement on 19 April 1996, with the following conclusion:

“1.The Ministry of Fisheries for the State shall pay NOK 300 000 in salvage money to Møre og Romsdal Fylkesbåtar AS. In addition, normal interest on late payments pursuant to §3 of the Act Pertaining to Late Payment shall apply, which currently stands 12% per annum, from 14 February 1995 until such time as payment is effected.

2. The Ministry of Fisheries for the State shall pay NOK 61 879 in legal costs to Møre og Romsdal Fylkesbåtar AS within two weeks following the service of this ruling.”

The Ministry of Fisheries for the State appealed the City Court ruling to Borgarting High Court. The High Court rendered judgement on 28 November 1997, with the following conclusion:

“1. The Ministry of Fisheries for the State shall pay NOK 20 000 for towage costs.2. Møre og Romsdal Fylkesbåtar AS shall pay NOK 97 903 in legal costs for the City

Court and High Court hearings to the Ministry of Fisheries for the State, with 12% interest per annum from the due date until such time as payment is effected.

3. The deadline for satisfying obligations pursuant to Points 1 and 2, is no later than 2 weeks following the service of this ruling.”

The High Court reached this outcome as, in the view of the Court, a determinative change in the situation occurred when the power was restored to the 24-volt generator. The High Court found that prior to this point, the pilot boat had been in peril, but that once the power was restored to the 24-voltage generator, in the view of the Court, the crew regained sufficient control of the boat that she no longer could be seen to be in peril, pursuant to the Norwegian Maritime Code.

Regarding the general facts of the case and the parties’ arguments before the lower courts, reference is made to the City Court and High Court rulings.

MRF appealed the High Court ruling to the Norwegian Supreme Court. It is stated in the appeal that the appeal is against both the High Court’s application of law and findings of fact, but in the proceedings before the Supreme Court, it was specified that it is primarily the findings of fact that are being disputed.

During the Supreme Court hearing, testimony was presented by 8 witnesses. Five of these witnesses testified at the recording of evidence, whereas 3 witnesses submitted written statements. One of the witnesses who testified at the recording of evidence, has submitted an additional written statement. There are no new witnesses before the Supreme Court.

For the Supreme Court hearing, the Norwegian Meteorological Institute has submitted a more detailed report of wind directions in the area in question on the night between 1 and 2 September 1993, than the weather report that was available to the lower courts. In all other matters, the case before the Supreme Court stands essentially as it did for the earlier hearings.

The Appellant, Møre og Romsdal Fylkesbåtar AS (MRF), in brief, has pleaded:That for the claim for salvage money to be valid, the pilot boat must, in objective

terms, have been in peril when the “Askepott” reached the pilot boat and fixed the towlines onboard. In MRF’s view, the situation was perilous. The pilot boat was exposed to peril that was clearly in excess of that which normally threatens shipping. Pursuant to the Norwegian Maritime Code, this is sufficient peril for the claim for salvage money to be upheld.

The High Court found that the crew onboard the pilot boat regained the necessary control of the boat once power was restored to the 24-volt generator. In MRF’s view, the High Court’s finding of fact on this point is incorrect. In the area in question and in the prevailing conditions, the manoeuvrability available to the crew was not sufficient to ensure the boat’s safe return to harbour.

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MRF argues that the result of the test run undertaken by Captain Alf Oddvar Giske on 13 November 1996 cannot be given weight when assessing whether the “Los 102” was in peril at the time that towage was established. The method, using the engines and propeller wing angles, employed by Giske was not known to the crew onboard the “Los 102”. The fact that it has been proved in retrospect that it was possible to manoeuvre the boat in this way, can therefore not be assigned significance as the crew onboard the pilot boat were not skilled in this method.

As a counter argument to the State’s alternative argument that the “Askepott” must divide the salvage money with the “Ada Waage”, MRF claims that the “Los 102” was no longer in danger when the “Ada Waage” took over towage as the “Askepott” was present and capable of towing the pilot boat to Kristiansund. The towage undertaken by the “Ada Waage” must therefore be seen as ordinary towage. Furthermore, MRF would point out that the Norwegian Society for Sea Rescue has not submitted a claim for salvage money and that the area where the pilot boat was positioned when the “Ada Waage” assumed towage is less hazardous than where the pilot boat was positioned when the “Askepott” commenced towage.

As regards the amount of salvage money, MRF pleads that it should be taken into consideration that this was a difficult job and that the pilot boat was in a dangerous area. In MRF’s view, the fact that the pilot boat was approx. 0.75 nautical miles from Gjeslingene when the “Askepott” commenced towage, should also be taken into consideration. The salvage operation was 100 per cent successful and was executed with considerable skill and proficiency. The pilot boat is valued at just under NOK 10 million, including VAT, and in order that salvage money should also function as an incentive, the salvage money should, in MRF’s view, in this case be set at NOK 300 000, as stipulated by the Oslo City Court.MRF has made the following demand:“1. Points 1 and 2 of the Oslo City Court ruling of 19 April 1996 be affirmed.2. Møre og Romsdal Fylkesbåtar AS be awarded interest in accordance with law, on the

awarded legal costs for Oslo City Court amounting to NOK 61 687 from 7 May 1996 until such time as payment is effected.

3. Møre og Romsdal Fylkesbåtar AS be awarded legal costs for Borgarting High Court and the Norwegian Supreme Court, with interest in accordance with law, on NOK 114 577 from 17 December 1997 until such time as payment is effected, and on the awarded Supreme Court legal costs commencing 14 days following the service of the payment order until such time as payment is effected.”

The Respondent, the Ministry of Fisheries for the State, in brief, has pleaded:In order for a peril to exist in the sense of the Maritime Code, there must be a real and

objective threat. This does not require an overwhelming probability of damage, but on the other hand, only a possibility is not sufficient. For peril to be imminent there must be a certain likelihood of accident. As regards the finding of facts in the actual situation, the requirement of normal probability shall apply, and the salvor shall have the burden of proof.

In the State’s opinion, the Court must find that when power was restored to the 24-volt generator, the pilot boat regained manoeuvrability. From this time forward, the crew had full control of the boat. In the view of the State, the pilot boat, at the time towage commenced, was not in peril, but in difficulty. The “Askepott” therefore has no grounds to claim salvage money, and the assistance rendered by the vessel, in the view of the State, must be seen as ordinary towage.

The State concedes that the method employed by Giske during the test run on 13 November 1993 was not known to the crew onboard the pilot boat, but is of the view that the method used by the crew was sufficient. When towage was established, the pilot boat must, in the view of the State, have been further south than claimed by MRF – closer to Godtaren. This would indicate that the crew onboard the pilot boat – by using the port-side motor and

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pointing the bow to the wind so that the wind came in from the fore from starboard – had been able to manoeuvre the boat in the desired direction – albeit at low speed.

The State has argued in the alternative that salvage money in the amount of NOK 300 000 is excessive.

If the pilot boat was in peril when the “Askepott” commenced towage, in the State’s view she must then also have been in peril when the “Ada Waage” took over. The “Askepott” must therefore divide the salvage money with the “Ada Waage”. The “Askepott” should not benefit from the fact that the “Ada Waage” has not claimed for salvage money.

When assessing the amount of salvage money, it is the State’s view that consideration should be given to the fact that neither the “Los 102” nor the “Askepott” were exposed to any great peril. The time that the “Askepott” used on the job, a total of 2 hours and 20 minutes (0045 to 0305 hours) should also be taken into consideration. Furthermore, the State has pointed out that the “Askepott” was not equipped to render salvage services and that the towage, in the view of the State, was poorly executed. Among other things, it is pointed out that the hawser broke.

The State has made the following demand:“1. Points 1 and 2 of the High Court ruling be affirmed.2. The Ministry of Fisheries for the State be awarded legal costs for the Norwegian

Supreme Court, plus interest of 12% per annum from due date until such time as payment is effected.”My view on the case is as follows:I rule in favour of the appeal.Before I broach the question as to whether in this case the peril was sufficient for

Møre og Romsdal Fylkesbåtar AS (MRF) to claim salvage money, I would say a few words about the legal basis for the assessment and the legal principles of assessment.

The salvage operation to which this case applies, was carried out on the night between 1 and 2 September 1993, and the question as to whether MRF can claim salvage money or not must therefore be decided on the basis of §224 of the Norwegian Maritime Code of 1893. This provision is based on the Brussels Convention on Salvage from 1910.

On 1 October 1994, the Norwegian Maritime Code of 1994 replaced the Norwegian Maritime Code of 1893, and the provisions pertaining to salvage were amended pursuant to Act no. 61 of 2 August 1996. The amendments were made following Norway’s accession to the International Convention on Salvage of 1989, and entered into force on 3 December 1997, in accordance with the Royal Decree of 5 September 1997. The amendments of 1996 do no affect the provisions relevant to this case, see NOU 1994:23 Salvage, p. 15. The conditions for salvage are now set out in the definition of salvage pursuant to §441 (a) of the Norwegian Maritime Code of 1994.

Pursuant to the Maritime Code of 1893, – as the provision was formulated following the amendment of 1964 – claims for salvage money could only be made on the condition that the vessel was “wrecked or in peril”. The background for the 1964 amendment was that Norwegian case law applied more stringent criteria for peril than the Brussels Convention of 1910 and consequently an intermediate stage of “assistance remuneration” had developed, which was assessed more generously than normal remuneration for services rendered, but not as liberally as actual salvage money, see Recommendation II by the Maritime Code Committee (1961), pp. 13-14 and Recommendation III by the Maritime Act Committee (1961), pp. 5-6. In the Proposition to the Odelsting it was, however, specified that there was no question of “abolishing the differentiation between salvage and assistance with the consequence that all instances of assistance would be equal with salvage”. Furthermore, pursuant to the amendment it was “only in those cases that fall under the correct legal

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interpretation of the convention’s definition of salvage” that the salvage rules should apply, see Proposition to the Odelsting No. 13 (1963-1964), p. 23.

For “peril” to exist pursuant to the Maritime Code, there must, in my view, be a real risk that the vessel will be lost or substantially damaged, and this risk must clearly exceed the peril to which shipping is ordinarily exposed. However, the danger does not need to be imminent for salvage operations to be carried out, nor does there need to be the express probability of damage, see S. Brækhus: Bergning (1968), p.11. A theoretical possibility of damage is, however, not sufficient.

As the Supreme Court pointed out in Rt 1996 907, the question as to whether danger exists or not must be judged objectively. It is not sufficient that the crew or the salvor believe that danger is present. Even though the assessment of peril is objective, any assessment of the question as to whether danger exists must be based on the situation at the time of salvage. This implies, firstly, that if a risk was present at that point in time, but did not later manifest itself, it is of no consequence to the assessment of whether or not there is a salvage situation. Secondly, the question as to whether danger exists must be assessed on the basis of the competence and skills of the crew onboard. In addition, the assessment of evidence should place emphasis on how the crew and the salvor in fact perceived the situation.

On the basis of the above, I will now deal with the question as to whether the situation in which the “Los 102” found herself when the “Askepott” arrived and commenced towage, was of such nature that the peril criteria set forth in the Maritime Code were fulfilled.

When evaluating this question, considerable weight must, in my view, be given to the documents written at the time of salvage or immediately thereafter. As the Supreme Court has pointed out in several rulings, there is often reason to place less emphasis on statements from witnesses recorded some time after the event, that are in conflict with, or change the picture established by, evidence taken at the time of the event, for example see Rt 1995 821 and Rt 1998 1565. Such statements may easily be influenced by the conflict and the interests of the parties involved as regards the outcome of the case, and generally, most people’s memory deteriorates with time. The statements given by the crew of the “Los 102” may also be influenced by the fact that in retrospect more stringent peril criteria have been applied.

From evidence recorded at the time of the event, I find, firstly, reason to mention the logbook at Ørlandet Radio due to the conversations that took place on the night between 1 and 2 September 1993. In connection with the initial call to Ørlandet Radio from the “Los 102” at 0020 hours, it is recorded that the “Los 102” “will try to start the engines; will notify if towage necessary”. According to evidence, power was restored to the 24-volt generator onboard the pilot boat at 0030 hours. It is recorded in the logbook at Ørlandet Radio that the “Los 102” contacted the Rescue Coordination Centre at 0045 hours, and in this connection, it is recorded that: “The high-speed craft “Askepott” will go to render assistance”.

The fact that it was agreed that the “Askepott” would go to render assistance after power had been restored to the 24-volt generator onboard the pilot boat, would indicate that the crew onboard the pilot boat did not feel at that point that they had regained control of the boat, and that they would require help to reach port.

Secondly, I place considerable weight on the report submitted by the navigator of the pilot boat, Arnfinn Ødegaard, to the Pilot Master in Møre and Trøndelag immediately after the salvage operation. Having reported on the problems experienced by the pilot boat in connection with the power supply onboard, Ødegaard writes:

“Decided to alert Ørlandet Radio (approx. 0025 hours) as the “Los 102” was drifting towards Smølaskjerene.

Made contact with Pilot Master Husby and the high-speed craft “Askepott”, which was berthed at Edøy.

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The latter came to render assistance. The towlines were fixed at 0150 hours and towage commenced towards Kristiansund. The hawser broke at 0210 hours.

At 0225 hours, the towlines were fixed from the rescue vessel, “Ada Waage”, which had arrived. Towage continued towards Kristiansund.”

There is nothing in this description that would indicate that the crew onboard the pilot boat had regained control of the boat after power had been restored to the 24-volt generator.

Thirdly, I would highlight the report that Pilot Master Stein Olav Husby wrote to the Norwegian Coastal Authorities on 3 September 1993. I quote from this report:

“The undersigned was woken at around 0100 hours on 2 September 1993 by a telephone call from the state-certified pilot, Iversen, who was onboard the “Los 102”. He reported that the launch had had a “black out” just as he was boarding the M/S “Condock III”, which was on route to Verdal. They were now adrift and needed tow assistance as soon as possible…

Contact was made with Ørlandet Radio by means of a portable VHF as the power supply on board was cut…

I immediately contacted the police who confirmed that the high-speed craft “Askepott”, which was berthed at Edøy, had been notified and would be the first vessel to arrive at the scene. The rescue vessel, “Ada Waage”, was also on her way.”

This report also clearly indicates that the crew onboard the pilot boat did not feel that they had regained control of the boat after power had been restored to the 24-volt generator.

Fourthly, I place considerable weight on the report that the master, Arne Iversen, onboard the “Askepott” submitted to MRF on 5 September 1993. I quote:

“RESCUE OPERATION 02 03 93. 0045 hours anchored at Edøy. Received message on VHF that the “Los 102” (pilot boat) had broken down in Griphølen.

Contacted the Rescue Coordination Centre to inform of our position and to say that we had our engines running.

Received message back from RCC to be on standby.At 0050 hours, received instructions from RCC to go to the disabled vessel to render

assistance.We left the quay at Edøy and started towards the disabled vessel that lay roughly 15

nautical miles away.Due to an extremely poor radar image, high seas and heavy rain it was difficult to

locate the disabled vessel.At 0140 hours we spotted the disabled vessel.At 0150 hours the towlines were securely attached onboard the disabled vessel.The weather in the area was poor, with a south-westerly moderate to fresh gale

blowing and heavy rain.Our position when the towlines were fixed was roughly 0.75 nautical mile west of

Gjeslingene.Towage commenced immediately.Due to high seas, towage was erratic and jerky.At 0215 hours the hawser broke. Our position was then roughly 2 nautical miles from

Langholmen lighthouse.Contacted the rescue vessel, “Ada Waage”, which by then had arrived, and requested

that they take over towage of the disabled vessel.We remained alongside the disabled vessel until the “Ada Waage” had started to tow

the disabled vessel.”Nor is there any indication in this report that the pilot boat was no longer in peril once

power had been restored to the 24-volt generator. In addition to the evidence mentioned here, I would also point out that it is true – it is not disputed – that, as it took the “Askepott” longer

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to arrive on the scene than initially estimated by Master Iversen, Harry Jørgensen, onboard the pilot boat, sent a radio message to the “Askepott” to establish her position.

On the basis of the available evidence, I find that the crew onboard the “Los 102” did not regain sufficient control of the boat once power had been restored to the 24-volt generator. The available maps show that the waters in the area are foul. Though there may be some uncertainty regarding the exact position of the pilot boat when the “Askepott” arrived and commenced towage, I find it to be highly probable that the pilot boat, in the prevailing circumstances, was exposed to a risk of damage that was so high that it is covered by the peril criteria stipulated in the Norwegian Maritime Code.

The State argues in the alternative that if danger existed when the “Askepott” commenced towage, then danger also existed when the hawser broke and the “Ada Waage” took over towage. The salvage money should therefore be apportioned between the “Askepott” and the “Ada Waage”. I do not find in favour of this view.

No claim for salvage money has been submitted on behalf of the Norwegian Society for Sea Rescue. I therefore do not find it necessary to discuss whether, at the time that the “Ada Waage” assumed towage, there was continued peril and whether the “Ada Waage” could therefore have claimed salvage money. As a result of the assistance rendered by the “Askepott” and the “Ada Waage”, the “Los 102” returned safely to port. The salvage operation therefore had a “useful result”, see the first paragraph of §445 of the Maritime Code, as the provision is formulated pursuant to the amendment of 1996. Prior to the amendment of 1996, the Code did not contain any express condition for salvage money, such as that salvage operations must have a “useful result”, but rather this was inherently understood, see NOU 1994: 23, p. 20. As towage was latterly completed by the “Ada Waage”, the salvage money for the “Askepott” can thus only be calculated the basis of the assistance rendered by the “Askepott”. MRF stated during the Supreme Court proceedings that they accept this point.

When fixing the amount of salvage money, the value of the pilot boat, the peril to which she was exposed, the danger involved in the salvage operation, the time that it took, and the manner in which the service was rendered shall, among other things, be taken into consideration, see §225 of the Norwegian Maritime Code 1893, cf. §446 of the Maritime Code of 1994.

According to the available information, the pilot boat is valued at nearly NOK 10 million, including VAT.

The City Court, on the basis of an overall assessment, fixed the salvage money at NOK 300 000. I concur with this assessment and the material reasons given by the City Court.

On the part of the State, it is argued that the assistance rendered by the “Askepott” was not well executed. I can, however, see no reason to reproach the crew onboard the “Askepott” for the manner in which towage was executed. The “Askepott” is a passenger vessel that is not equipped for salvage operations. According to the available information, I find that the operation was executed with due care and proficiency, and that the crew did what was possible in the prevailing conditions. The fact that the hawser broke cannot be taken as a sign of poor seamanship.

In addition to salvage money, MRF have claimed interest on overdue payment from 14 February 1995. The claim for interest on overdue payment is not disputed, and furthermore, the parties agree on the basis for the calculation of interest.

I find in favour of the Appellant. In accordance with the main rule in the second paragraph of § 180 of the Civil Procedure Act, cf. first paragraph §172, I find that the State shall pay legal costs for all instances.

In addition to interest on overdue payment for the legal costs awarded by the City Court, MRF have claimed interest on overdue payment for the legal costs in connection with

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the High Court hearing on 17 December 1997 and the Supreme Court hearing, from such time these costs fall due until payment is effected. In accordance with judicial precedence, in cases where legal costs for courts of first instance are not awarded, interest on overdue payment cannot be charged on legal costs for the court of the first instance awarded by the appeal court. However, in cases where interest compensation is claimed, this can be done by fixing a discretionary supplement to the legal costs for the court of first instance in order to compensate for the estimated interest loss suffered by the party in question, for example see Rt 1997 1210.

In total, legal costs for the High Court and the Supreme Court are set at NOK 310 000, of which NOK 90 619 is an attachment charge.

I vote for the following judgement:1. The City Court judgement is affirmed.2. The legal costs awarded by the City Court are subject to an interest rate of 12% per

annum from 7 May 1996 until such time as payment is effected.3. The Ministry of Fisheries for the State shall pay NOK 310 000 in legal costs for the

High Court and Supreme Court hearings to Møre og Romsdal Fylkesbåter AS within 2 weeks following the service of this ruling, with 12% interest per annum from the due date until such time as payment is effected.Judge Tjomsland: I find – though subject to some doubt – in concurrence with first voter, that the conditions for salvage money have been met.

However, I find that the salvage money set by the City Court is excessive. I would emphasise that the “Askepott” used considerably shorter time in connection with the salvage operation – 2 hours and 20 minutes – than has been the case in the majority of judicial decisions referred to here. I would also emphasise that only part of the salvage operation was executed by the “Askepott”. Having towed the “Los 102” for 20 minutes, the hawser broke. The “Ada Waage”, which is better equipped for this type of operation, then took over – on the request of the “Askepott” – towage into Kristiansund. When the “Ada Waage” took over towage, the “Los 102” would still have been in peril had she not been rendered assistance. I find that the salvage money should therefore be set at NOK 200 000.Judge Oftedal Broch: I agree in essence and outcome with the first voter, Judge Skoghøy.Judge Matningsdal: Likewise.Judge Bugge: Likewise.Following the vote, the Supreme Court rendered the following judgement:

1. The Oslo City Court judgement shall be affirmed.2. The legal costs awarded for the City Court hearing shall be subject to an interest of

12% per annum from 7 May 1996 until such time as payment is effected.3. The Ministry of Fisheries for the State shall pay NOK 310 000 in legal costs for the

High Court and Supreme Court hearings to Møre og Romsdal Fylkesbåter AS within 2 weeks following the service of this ruling, with an interest rate of 12% per annum from the due date until such time as payment is effected.

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NOU 1993:36The Carriage of Goods by Sea

To §325 Demurrage:§ 85 of the Norwegian Maritime Code sets demurrage at half the length of lay time, but in the case of a bareboat charter, it shall be no less than three days. In the Committee’s view, the basis of the Act should – in accordance with international practice – be that time on demurrage shall be set based on the time needed by the charterer to complete loading, unless the length of time is otherwise specified in the agreement, cf. see comments to the subsection entitled Loading Time, above. In contrast to the Maritime Code, the first paragraph therefore fixes demurrage as that time in excess of lay time that the ship has to remain in order to complete loading. This is basically in accordance with English legislation. Subject to the charterer fulfilling its obligation to pay demurrage, cf. §326, and unless otherwise specified in the agreement, the carrier is obliged to keep the vessel in port as long as necessary to complete loading. Pursuant to the second paragraph of §346, the carrier can, however, repudiate the contract or declare loading to be completed if loading is so delayed that further delay will cause the carrier to incur material harm or disadvantage, even if demurrage is paid. In English law, the carrier is obliged to keep the vessel in port provided demurrage is being paid, until the conditions for pleading “frustration by delay” are fulfilled. Such a rule has proven to be unreasonably burdensome with respect to the carrier and would not be consistent with the Nordic legal tradition. In the Committee’s view the draft represents a reasonable compromise between the Norwegian Maritime Code’s too “carrier-friendly” and English law’s too “charterer-friendly” solutions.

Pursuant to the first point of the second paragraph, demurrage is calculated in continuous days and hours. Since, pursuant to the draft, demurrage is the time in excess of lay time required for loading, and not a period directly fixed in days, it is not necessary to distinguish between the length of lay time in relation to the carrier’s obligation to keep the vessel in port, on the one hand, and the carrier’s right to compensation, on the other, cf. the second paragraph of §85 of the Norwegian Maritime Code. The reference in the second point of the second paragraph of §324 corresponds to the reference in the second point of the second paragraph of §85 of the Maritime Code, to §84.

To §326 Compensation for demurrage:The provision in the first point of the first paragraph pertaining to the carrier’s right to separate compensation for demurrage is in accordance with the second paragraph of §80 of the Norwegian Maritime Code. The provision in the second point pertaining to the calculation of compensation is in accordance with the first paragraph of §86 of the Norwegian Maritime Code.

Pursuant to the second paragraph, the right to compensation matures on demand, cf. the second point, first paragraph of §5 of the Act relating to Promissory Notes, not “day by day” as in accordance with the second paragraph of §86 of the Maritime Code. Daily payment is burdensome and in practice requires that the charterer pay before the carrier has stated the amount of compensation it feels is due. The carrier is best equipped to calculate compensation.

If the charterer does not pay compensation or furnish security following a claim, the carrier is entitled to make a notation of the claim on any bills of lading issued by it, cf. first point of the third paragraph, which corresponds to the third paragraph of §86 of the Maritime Code. This is a prerequisite to making a valid claim against good faith purchasers of the bill

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of lading, cf. the second point, second paragraph of §336, §299 and the second paragraph of §160 of the Maritime Code.

Pursuant to the second point, the carrier can, if no notation has been made on the bill of lading regarding compensation, demand that the charterer make payment within a reasonable time, cf. similar provisions in second paragraph of §25 and the second paragraph of §54 of the Sale of Goods Act of 1988. What constitutes a reasonable time must be assessed in concrete terms, based on the circumstances of the individual case. Weight must be given to what can be deemed an acceptable delay on the part of the carrier. Accordingly, if the sum involved is substantial, a shorter delay will be acceptable. It is not required that the time limit be so long that the delay would give the carrier the right to repudiate the agreement due to material breach of contract. On the other hand, the rule shall be applied with the aim of securing a just clarification and shall not be misused to secure a right of repudiation in the event of minor delays.

If the charterer does not pay within the time limit, the carrier can repudiate the contract and claim damages in accordance with standard rules of contract for losses resulting from the cancelled voyage, cf. third point. The charterer’s obligation is a financial obligation, and pursuant to standard contract law, the charterer therefore has an objective responsibility with the exception of “force majeure”, cf. third paragraph of §7 of the Act relating to Promissory Notes. The charterer cannot prevent cancellation by providing security. The provision of security by the charterer only ensures that the demurrage claim is not noted on the bills of lading.

In comparison with relevant legislation, the rules in the third paragraph deviate in that the carrier must set a reasonable time limit for payment, which limit has to expire before the agreement can be cancelled. On the other hand, the rules do not require that late payment be seen as a material breach of contract.

If the carrier has already issued bills of lading without notice of unpaid demurrage, the voyage will ordinarily have to be executed out of consideration to the holders of the bills of lading, even though the carrier chooses to cancel the agreement with the charterer.

If conditions exist for claiming repudiatory breach, for example if the charterer has stated that compensation will not be paid, then the carrier is not required to set a time limit and wait for its expiration before cancelling the agreement.

(……)

To §339 Cancellation time:The first paragraph is in agreement with the second paragraph of §126 of the Norwegian Maritime Code, with the exception that it specifies that the vessel must not only be ready for loading, but must have tendered its Notice of Readiness within the agreed time limit, in order for the carrier to avoid the application of the charterer’s right to cancel the agreement.

The first paragraph also applies to consecutive voyages. If a cancellation time is agreed in connection with consecutive voyages, the cancellation time is normally linked to the start of the first voyage. So that, in the event cancellation time is exceeded, the charterer may cancel the agreement, i.e. repudiate the entire agreement so that all voyages are cancelled. Unless specific provisions are set forth in the relevant agreement, e.g. that cancellation times are set forth for each of the voyages, the charterer does not have the right to cancel only the first voyage, if the cancellation time for the first voyage is exceeded. This shall be the case even though the completion of the first voyage is not material to the carrier in relation to the remaining voyages. If there is an agreed cancellation time for a later voyage, the parties’ interpretation will normally be that if the cancellation time is exceeded, the charterer has the right to cancel that single voyage, but will not have an unconditional right to cancel all the

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remaining voyages. The Committee has not found it necessary to include a rule that specifies this in the draft. The restriction of the right of repudiation in the second point, second paragraph of §340 does not apply if the cancellation time is exceeded for a later voyage.

The second paragraph deviates from the third paragraph of §126 of the Norwegian Maritime Code in two ways. On the one hand, notification of delay will not obligate the charterer to make a decision regarding cancellation without undue delay, unless the carrier specifies in the notification at what later time the vessel will be ready. The charterer thereby avoids having to make a decision without some certainty as to when the vessel is likely to be ready for loading. The specified time will then be the new cancellation time if the charterer does not cancel without undue delay. The carrier thereby achieves some security that the agreement cannot later be cancelled, provided the new cancellation time is not surpassed. When setting a time limit by which the charterer has to make a decision, one must, taking into account the fact that the charterer needs time to consider the matter, give weight to the fact that the purpose of the provision is in part to prevent the carrier incurring unnecessary costs in connection with preparations for fulfilling a contract that is to be cancelled, and in part to limit speculative opportunities for the charterer to exploit the delay. Weight should also be given to the time aspect, viewed in isolation. If the carrier gives notification of a short delay just before the cancellation time, the charterer shall be required to make a decision more or less immediately. If notification of a longer delay is given in good time, the charterer can take a longer time to decide. Account shall also be taken of whether the carrier waited a considerable time to issue notification once it became aware that the cancellation time would not be met. The carrier cannot reduce the charterer’s time for consideration by delaying its notification.