|
FEATURE |
This article is a rebuttal to certain points raised in an earlier article published in the February 2010 issue of the Singapore Law Gazette titled “Classification Societies, Negligence Liability and Pure Economic Loss”. In the article published earlier, the author Eric Chew, had discussed classification societies and their expanded roles in the 21st century, whether a duty of care towards third parties should be imposed on classification societies, whether classification societies should be liable for damages in tort for pure economic loss, together with a comparative analysis of historical cases in common law jurisdictions with regards the imposition of a duty of care on classification societies for pure economic loss suffered by third parties, as well as an analysis of recent cases on the imposition of duty of care on classification societies for pure economic loss suffered by third parties to determine if classification societies’ “immunity” from such liability is likely to continue.
Classification Societies, Negligence Liability
and Pure Economic Loss – A Rebuttal
Introduction
We read with great interest the article by Mr Eric Chew entitled “Classification Societies, Negligence Liability and Pure Economic Loss” in the February 2010 issue of the Singapore Law Gazette. One of the co-authors of this article, Ken Abel also attended ICMA XVII in Hamburg, Germany in October 2009, where the paper was presented to the delegates.
Mr Chew’s well researched paper deals with a complicated and delicate subject. The paper and its reception in Hamburg, reflect, in our view, the misapprehension on the part of various members of the shipping community as regards many Courts’ view that classification societies should not be held liable to third parties for damages arising out of acts or omissions of simple negligence on their part, particularly in situations involving economic loss only. Such misapprehension ranges from a hostile attitude of certain plaintiffs (or perhaps their lawyers) to mild questioning by a number of people, Mr Chew being somewhere in between.
As classification societies are an integral part of the maritime industry and shipping is essential to modern trade and commerce, we decided to write this rebuttal to Mr Chew’s article in order to get a constructive debate going with a view to cultivating a greater understanding of the workings of classification societies and a society wide view of how the various actors in the maritime arena – ie, shipowners, cargo owners, hull and liability underwriters, flag states, port states, coastal states, international organisations, classification societies and numerous others – can work together to enhance their roles and their co-operation in promoting and doing their utmost to ensure together, the safety of life and property at sea.
Classification Societies and Negligence Liability – Our Opinion
At the outset, we would like to note that while Courts around the world have recognised, for public policy reasons, a limitation on the liability of classification societies for damages caused by simple negligence, shipowners and other members of the maritime community have an absolute ceiling – at a relatively low level – on liability for simple negligence accorded to them by several international conventions such as the 1996 Limitation Convention and the 1992 Civil Liability Convention. As to the latter convention, a United States Court has held that it protects class while a French Court has declared that it does not. See Reino de Espana v American Bureau of Shipping, 528 F. Supp. 2d 455 (S.D.N.Y. 2008); In Re Erika, Paris Court of Appeals – area 4, division 11E – General Register No 08/02278 ( March 30, 2010).
Second, we must point out that contrary to the expressed views of Mr Chew, and despite a properly and generally recognised view that classification societies ought not to be held liable to the world for acts of simple negligence for extremely good reasons (which will be set forth infra),1 they are, in fact, subject to an enormous number of quality controls, including their own rules and self-regulation, as well as audits done on behalf of: (i) The flag states who appoint class as their representatives so that they and the flag state may remain compliant with safety and environmental conventions to which virtually all nations are party to; (ii) the International Maritime Organization who sets requirements for “Recognised Organisations” (the role classification societies play when they act to inspect and certify vessels are in compliance with various international maritime conventions); (iii) the European Union’s Marine Safety Agency (“EMSA”); (iv) the International Association of Classification Societies (whose attempts to unify safety standards of the classification societies have been explicitly endorsed by – and mandated by – the European Union; and (v) enumerable others.2 On top of this, they are responsible to the owners who pay them. Moreover, classification societies do not refute liability as a matter of course, but invariably investigate all incidents and possible failures of their surveys and procedures using independent experts to fully investigate the circumstances involved in all cases brought against them. To safeguard a classification society, it is necessary to look at the circumstances without pre-conceived ideas and to evaluate them thoroughly and in detail. However, the basis of the “Flag/ Port State/ Class / Owner” relationship starts and ends with the owner’s non-delegable duty to maintain his vessel in a good condition, as prescribed by the classification society’s rules, the rules prescribed by international standards, and hundreds of years of caselaw and experience. Such a relationship leads to our opinion that a classification society cannot owe a direct duty of care to anyone but the vessel’s owner and the flag state with which it interacts regularly.
With respect to Mr Chew’s view that the economic loss doctrine should not apply to third party actions against classification societies, we can only note that in virtually every common law jurisdiction, the Courts hold that sophisticated third parties cannot recover in tort for economic loss only, for the simple reasons that they easily protect against such losses in advance through their contracts and through insurance and that to allow such recovery would pose the frequent problem of redundant or needlessly expensive insurance.
We shall now proceed to take a critical look at Mr Chew’s article in the same order in which he presented his arguments.
Modern Functions of Classification Societies
Mr Chew argues that classification societies “enforce rules and standards”. In fact, classification societies do not do so. They make recommendations to vessel owners which they will have to comply with so that their vessels remain “in class”.
All classification societies make it clear that the classification relationship is between them and the vessel owner and they always explicitly disclaim their liability to third parties in their documentation. Vessel owners are at liberty to use class certificates as they wish. For example, a vessel owner may use class certificates to warrant to a third party that on a certain date his vessel was “in class”. However, there should be no legal reliance by third parties on the work or documentation of a classification society as it would undermine the shipowner’s non-delegable duty to maintain a seaworthy vessel. See Great American (below); Nicholas H (below).
We agree that Courts may be unlikely to uphold exculpatory clauses or disclaimers of liability to their full extent and breadth as to third parties, for sound public policy reasons, see eg, Sundance Cruises Corp. v American Bureau of Shipping 799 F.Supp. 363, 378 (S.D.N.Y.,1992) (“we are inclined, without the benefit of trial testimony as to the parties’ intention, to agree with Judge Tyler’s dictum that such total absolution from liability ‘is overbroad and unenforceable as contrary to public policy’ quoting Great American Insurance Co. v Bureau Veritas (S.D.N.Y.1972) 338 F.Supp. 999, 1010, n. 6).
On the other hand, it is clear that such clauses do give a strong indication of how the shipowner and the classification society intend to allocate responsibility between them and how they intend, between the two, to allocate their responsibility to third parties. See In re Oil Spill by the “Amoco Cadiz” Off the Coast of France on March 16, 1978 1986 WL 2537, fn. 6 (N.D.Ill.) (N.D.Ill.,1986) (“[a]lthough this Court has some doubt whether the broad exculpatory clause contained within the certificates issued by ABS is legally enforceable, it does indicate that ABS did not intend to assume liability for the unseaworthiness of the Amoco Cadiz, especially for that which was caused solely by the negligence of Amoco”); Reino de Espana v American Bureau of Shipping, 729 F.Supp.2d 635, 646 (S.D.N.Y.,2010) (“[to allow recovery by a coastal state against a classification society for oil spill damage] would ... run afoul of the intentions of the shipowners and classification societies contracting for classification services, as demonstrated by the instant certification’s explicit disclaimer of any representation to a third party, and the disproportionality between the relatively small fee paid to the classification society and the potentially limitless scope of third party liability”).
In any event, it is clear – as it should be – that, at least in the US and UK, that exculpatory clauses will remain binding as to the parties, the shipowner and the classification society – as they are fully able to allocate the economic and functional responsibility between them. See, eg M/S Bremen v Zapata Off-Shore Co. 407 U.S. 1, 16, 92 S.Ct. 1907, 1916 (U.S.Fla. 1972).
Private Law Functions
In discussing a classification society’s private law functions, Mr Chew cites various common contracts that “… contain conditions that the vessels must be maintained in class”. Whilst true, it is to be noted that in such contracts, it is the owner’s duty to ensure that the vessel is maintained in such condition that it is “in class” at all times and to inform the classification society of any condition that may affect class so that a surveyor may be dispatched to verify that the condition has been properly rectified. The owner must possess the relevant class certificates on the basis of which he can then warrant to parties with whom he is contracting that the vessel is “in class”. It is not the classification societies’ duty to ensure that the vessel is in class.
Mr Chew states correctly (in points 1 to 4) that classification societies review design plans, verify that vessels are built to the rules and conduct surveys to ensure that vessels in service remain in class. This confirms that classification societies neither carry out design functions nor order shipyards to perform certain work. Classification societies only verify, after carrying out relevant surveys, that a vessel is in such a condition to be or remain “in class”.
Public Law Function
As for classification societies’ public law functions, it is only reasonable and sensible for classification societies to act on behalf of Flag States, as the requirements for a vessel to be or remain “in class” overlap in a number of instances with statutory surveys, including SOLAS (which requires that a vessel be in class before a SOLAS certificate can be issued and sets forth essentially identical, but less detailed, safety construction requirements as class), the Loadline Convention, and MARPOL (which mandates the Enhanced Survey Procedures for vessels 15 years of age and older, which are set forth in greater detail in class rules and the requirements of the International Association of Classification Societies (“IACS”). Furthermore, classification societies have an extensive record and history of the vessel’s hull and machinery. However, Flag States, in their instructions to classification societies, set out in detail how surveys on their behalf are to be carried out. The societies have limited discretion so far as such matters as the deferral of surveys are concerned. Any serious statutory problems have to be brought to the attention of the flag authorities for guidance and instructions, and the flag states similarly require that the vessel owner inform the flag state of any condition on the vessel which may affect its statutory certification, so that the flag state may, in turn, carry out any required survey either with its own surveyors or those of the Recognized Organization which classes the vessel. Thus, the shipowner remains with the non-delegable duty to ensure its vessel’s seaworthiness, and it and its vessel are monitored, to the extent possible, by the flag state, acting through its appointed Recognized Organization (virtually always a major classification society).
The Intermingling of Private and Public Class Functions
For the reasons set forth above, the authors believe it is beyond dispute that the private and public functions of classification societies are inextricably interwined and cannot, in a practical sense, be severed. Thus, in a recent intermediate French appeals Court decision arising out of the Erika casualty, in opining about RINA spA, the Italian classification society, the Court observed:
Thus, SpA RINA, being authorized by the State of Malta to issue statutory certificates for ships, is vested with the discretion of a governmental authority, and must be accorded jurisdictional immunity in connection with the statutory certificates that it issues.
As it relates to the class certificate, while its issuance does not depend on the flag state, the conditions therefore are part of the set of rules which conditions the statutory certification, through cross-references which the Solas and Load Lines agreements make to it, and they contribute to providing a public service activity, specifically improving the safety of navigation.
Erika Decision, Paris Court of Appeals – area 4, division 11E – General Register No. 08/02278 ( March 30, 2010), Page 325 (Certified Translation Submitted to New York Court).
Similarities with Inspection Bodies
Unlike inspection bodies charged with detailed examinations, but also, and critically, are ordinarily granted the authority to enforce (police power) or, often, the sole control over the activity in question, classification societies do not conduct inspections, they carry out surveys. After attending on board, a surveyor will certify that a particular survey has been carried out and that either the vessel remains “in class” or that the status is subject to further action by the ship owner, to be carried out within a specific time frame. The essential difference is that a classification society, like the governments acting pursuant to international convention, can only promote safety – they cannot ensure it.
Classification societies do not “serve the same function as inspection companies” and do not serve the same function as state authorities, architects, structural engineers and members of all professions for the following reasons:
1. It is the owner’s non-delegable duty to maintain the vessel in such condition as to allow her to remain in class. The owner is the only person who can do so, because only the vessel’s crew can and must constantly monitor the vessel’s condition and report it to the owner. The shore staff must then organise such assistance as may be required.
2. In contrast to a shore-based inspection, a classification society’s surveyor only attends on board a vessel at annual intervals, and, even then, at the request of the owners, after reminder by class, unless called upon by owners in connection with an incident which “will or may affect class”, as is clearly set out in the Rules of every Society appertaining to Ships in Service. A surveyor will only attend to items that concern the survey he has been instructed to carry out. Should a surveyor note any condition he considers unsatisfactory, he will report this to the vessel’s master and the appropriate corrective action will then have to be taken by the owner.
All the entities mentioned by Mr Chew carry out a finite inspection of an item, eg, fuel oil sampling and analysis, or a project on which a design firm or building inspector will sign off. Virtually always, these entities are primarily in control (ie, the final word), ie, have the equivalent of policing power, and issue very specific forms of approval.
3. Consequently, the basis on which classification societies render services to vessel owners are, by its very nature that vessels are constantly on the move, totally different to those rendered by building inspectors or similar professionals.
4. Finally, the “Class” system can only function when there is complete co-operation between vessel owners and classification societies. Owners must be open and honest in their dealings with classification societies, observe classification rules and carry out maintenance and repairs as and when required. Unfortunately, that is by no means always the case. Instead, some owners deliberately hide pertinent facts from surveyors, who may then sign a certificate in good faith and be blamed for the consequences.
As set forth above, however, under modern regimes, including those within class itself, it has become more difficult for anyone, including the shipowner, to hide relevant and material facts. Accordingly, the system continues to improve and the shipowner has less incentive to delude itself, its maritime community, and the employees who work for it.
As for Mr Chew’s arguments on the owner’s non-delegable duty to maintain a seaworthy vessel, the term “un-seaworthy” is a legal concept and will not appear in Class documents. The Class system is supposed to function in the following manner:
1. Any defects which may affect class in a vessel, which are identified by the vessel’s crew and/or the owners’ shore staff, must be reported to the classification society;
2. A surveyor will then attend on board and recommend repairs;
3. If the defect is of a minor nature, the surveyor has the discretionary option of allowing the owner to defer repairs until a set date in the future. More serious matters must be repaired immediately, in accordance with the surveyor’s recommendations; and
4. If an owner feels that a surveyor’s recommendations are too onerous, he can appeal to a senior surveyor, or ultimately to the Society’s headquarters.
5. Ultimately, it is up to the owner to execute the necessary repairs and ensure seaworthiness. The vessel can still sail without the repairs being carried out, immediately or in the future, but it will not be considered to be “in class … with the result that any warranties which the owner may have given to the effect that the vessel is in class will lapse”.
Mr Chew’s views on the International Association of Classification Societies (“IACS”) and its effect on the proliferation of classification societies, we believe, are somewhat inaccurate.
IACS was formed by consent among the major Classification Societies in 1968 at a time when classification societies often competed with each other by lowering standards, creating, in effect, a “race to the bottom”. The major class societies, strongly encouraged by the International Maritime Organization, an agency of the United Nations, recognised that this was unacceptable. IACS established an overall improvement in the operation of classification societies and through their various committees IACS has done and continues to do much to improve the safety standards of vessels.
Although there has been a remarkable proliferation of classification societies in recent years, some of the newcomers were not accepted into IACS. This led to all the European classification societies and IACS itself coming under the scrutiny of the European Commission who suspected them of practices which were allegedly contradictory to European Union (“EU”) anti-competition rules. After some 20 months of investigation and negotiations, an agreement was reached, whereby it was possible for smaller Societies to become members of IACS. In our opinion, this may amount to a retrogressive step, leading to the lowering of standards, all this in the fact of the quite proper exhortations of the EU that classification societies should not compete with respect to safety standards.
The United States
Mr Chew properly appreciates the US Court decision in Great American Insurance Company v Bureau Veritas (“Great American”) in which the Court suggests that a classification society may theoretically be found liable for damages occurring to a shipowner and its subrogated underwriters as a result of a classification surveyor’s failure: (i) to exercise due diligence in surveying and classifying a ship in accordance with rules and standards established and promulgated by the society; or (ii) to exercise due diligence to detect defects and notify the owner/charterer of the same.
In Great American, the Court, however, notes, in a manner so eloquent that these authors are ill-advised to paraphrase it, that there is:
a potentially insuperable bar to any recovery at law for a breach of the first duty, to survey and classify in accordance with its own rules and standards. This potential bar stems from the long-standing policy or rule that the owner of a ship has a non-delegable duty to maintain a seaworthy vessel…[and]... that an owner cannot make a favorable survey or classification the basis of a due diligence defense…
The unstated policy underlying the decisions not to allow surveys and classifications to operate as defenses to the duty of providing a seaworthy ship is clearly to preserve the ancient, absolute responsibility of an owner for the condition of his ship. This is evidenced by the fact that, were such surveys and classifications allowed to constitute a due diligence defense, the accountability of owners for the seaworthiness of their vessel for all practical purposes would evaporate. This, in turn, would have the effect of leaving injured seamen and shippers with no effective remedy in most cases.
In theory, recognition of a right of action against a classification society would confer benefit upon ship owners, ship operators and seamen. In practice, such a “new remedy” would produce several undesirable effects. One of these would be to place the ultimate responsibility for seaworthiness on an organization which has contact with the vessel for only brief annual periods, whereas the owner, who is always “present” in respect to his vessel, would elude liability in many cases. Second, this right of action would have the effect of making the classification society an absolute insurer of any vessel it surveys and certifies. Not only is this liability not commensurate with the amount of control that a classification society has over a vessel; it is also not in accord with the intent of the parties, the fees charged or the services performed. Further, by making classification societies the effective insurers of nearly all seagoing vessels, insurance companies such as those here involved, might be putting themselves out of business, a result they certainly did not contemplate by bringing this suit. [citations omitted].
As to the second duty, Great American noted, “the duty to use due care to detect and warn of hazards appears to provide a sounder basis for tort liability of a ship classification society”. Nevertheless in considering possibly analogous cases, such as where implied contractual indemnity of third parties could be implicated, the Court considered that all those where liability should be imposed involved a third party who had control over the activity at hand. Thus, the Court stated:
Recognizing this rationale, I note that the services and activities of a classification society differ markedly from those provided by a stevedore, carpenter, ship’s cleaner, and the like. While an owner may have little or no direct control of the activities of a classification society aboard ship, the society rarely, if ever, would create hazards or defects by its functions and activities. Moreover, unlike a stevedore and other similar service contractors, a classification society is functionally incapable of repairing or rectifying defects or hazards caused by itself or others. Virtually all a society can do is observe and report to the owner whatever its inspections reveal. In light of these distinctions, to rule that a ship owner or operator can evade or pass off his historic primary duty to furnish a seaworthy vessel by strict application of the Ryan ... [implied indemnity] doctrine to a classification society, in my judgment, would work an unsound and unfair dilution of that legal duty.
The authors of this paper stand strongly behind the principles set forth by the Great American Court and view them at least as valid today as when first enunciated, over 35 years ago. It should be noted that the Courts in case after case, including Sundance Cruises et ano v American Bureau of Shipping, 799 F.Supp. 363 (SDNY 1992), aff’d 7 F.3d 1077 (2d Cir. 1993), cert. denied, 511 U.S. 1018 (1994), strongly reaffirmed the principles of Great American.
Mr Chew also sees further “progress” in the decision of Otto Candies LLC v Nippon Kaiji Kyokai Corporation, 346 F 3d 530 (5th Cir 2003), where a classification society was found liable to a vessel purchaser where, having actual knowledge that the purchaser was relying upon its surveys, negligently failed to discover defects that led to damages to the purchaser. Significantly, as Mr Chew recognises, however, without actual knowledge that the third party is relying on the society’s statements, no duty of care arises, and we submit, no such duty should arise. Additionally, while finding liability in that case, the Court correctly observed that:
Imposition of undue liability on classification societies could be harmful in several ways. The societies could be deterred by the prospect of liability from performing work on old or damaged vessels that most need their advice. The spreading of liability could diminish owners’ sense of responsibility for vessel safety even as it complicates liability determinations. Ultimately, broader imposition of liability upon classification societies would increase their risk management costs and rebound in higher fees charged to the societies’ clients throughout the maritime industry. Whether such risk-spreading is cost-efficient in an industry with well-developed legal duties and insurance requirements is doubtful. The distinctions articulated in caselaw to date recognize the care with which claims against classification societies must be studied.
England
With regards Mr Chew’s opinions on the cases from England dealing with negligence liability of classification societies, we have the following comments.
The “Morning Watch”
Mr Chew states that “Lloyd’s constitution envisages purchasers’ reliance on vessels being in class to be an indication of good condition”. We perused Lloyd’s constitution and have been unable to find such a direct statement, although we can certainly agree that Lloyd’s and other classification societies operate in the public interest and caution their surveyors to bear in mind that solemn obligation. To suggest that the referenced reliance is of the sort that leads to legal liability, however, is contrary to unbroken court decisions that shipowners may not rely upon classification of their vessel as evidence of seaworthiness. See Marc Rich & Co AG v Bishop Rock Marine Co Ltd (“The Nicholas H”) [1993] E.C.C. 121, 143 (.1992-07-02).
We are also of the opinion that the Court in the “Morning Watch” was correct in finding that there was an insufficient degree of proximity between the classification society and the purchaser of the Morning Watch because the classification society’s objective was to use its best efforts to “enhance the safety of life and property at sea”. The Court’s finding may have been different if the classification society’s duty was to guarantee the safety of life and property at sea and not merely to enhance it.
Further, classification societies have never “… declared that part of their work is for the benefit and reliance of third parties …” In fact, they do the exact opposite.
As discussed above, there are good reasons for the Courts’ refusal, to use Mr Chew’s words, “to advance the law of negligence …” in relation to classification societies. In fact, we must disagree with Mr Chew’s characterisation – in our view, to hold classification societies liable for simple negligence would not advance the law of negligence. Such a change would actually set back the law of negligence and undermine the policies which underlie the classification system – to promote safety – by permitting those with the non-delegable duty to provide and maintain a seaworthy vessel to pass off some, or all, of this duty to entities that exist solely to remind owners of this duty, and to assist them as best anyone can who is not on board the vessel 24 hours a day and 365 days a year. Holding classification societies to the standard suggested by certain plaintiffs’ lawyers would only dilute the benefits of classification and provide a disincentive to ship owners to be diligent in ensuring a seaworthy vessel. It must always be remembered that the class system can only function if certain basic facts are understood and adhered to. They are:
1. The owner operates his ship according to rules of the classification societies;
2. Surveys are carried out at the prescribed intervals;
3. Any incident which does or may affect the ship’s classification status must be reported promptly to the society; and
4. Repair methods and procedures are to be discussed and agreed with the society before repairs are put in hand.
The Nicholas H
Classification societies, unlike the port authorities, have no legal authority to prevent a vessel from sailing. All that a classification society can do legally is to refuse to issue the necessary certificates, but the owner may sail regardless. However, as noted in Marc Rich & Co AG v Bishop Rock Marine Co Ltd (“The Nicholas H”) [1996] E.C.C. 120, 136 (.1995-07-06):
Owners are under irresistible commercial pressure to obtain and maintain a classification of their vessel. The insurance of an unclassed vessel and her cargo would not be feasible at economically justifiable rates of premium. No sensible charterer would charter such a ship. Owners are therefore in practice compelled to ensure that their vessels remain in class. For that purpose owners must enter into a contractual engagement with a classification. The classification society will grant and maintain classification of the ship if the requirements of its own rules and regulations are met. And the classification society has in practice control over the question whether a damaged vessel, without permanent repairs, will be allowed to complete her intended voyage.
Notwithstanding the referenced statement in Nicholas H, the authors of this article note that it is not at all unusual for a vessel to sail in violation of class recommendations, perhaps thinking nothing will come of it and that its insurers would never discover the breach of the ship owner’s covenants. Only an entity with actual police powers can actually prevent a ship from sailing.
We recognise Mr Chew’s views about the Nicholas H. However, note that the key ruling in that case is that:
the recognition of a duty would be unfair, unjust and unreasonable as against the shipowners who would ultimately have to bear the cost of holding classification societies liable, such consequence being at variance with the bargain between shipowners and cargo owners based on an internationally agreed contractual structure. It would also be unfair, unjust and unreasonable towards classification societies, notably because they act for the collective welfare and unlike shipowners they would not have the benefit of any limitation provisions. Looking at the matter from the point of view of cargo owners, the existing system provides them with the protection of the Hague Rules or Hague-Visby Rules. But that protection is limited under such Rules and by tonnage limitation provisions. Under the existing system any shortfall is readily insurable. In my judgment the lesser injustice is done by not recognising a duty of care.
Marc Rich & Co AG v Bishop Rock Marine Co Ltd (“The Nicholas H”) [1996] A.C. 211, 242 (1995-07-06).
Singapore
Mr Chew’s comparison between the duty owed by “… management corporations to correctly design buildings …” and the function of classification societies constitute a quantum leap for a number of reasons of which the most obvious one is the fact that classification societies do not design ships. Mr Chew correctly noted that:
If a court is not going to impose a duty of care on grounds of public policy, it must articulate its concerns and not give the impression that “there remain ‘unexpressed motives’ behind their finding for or against a duty”.
As for pure economic loss, although the decided cases all relate to loss suffered by owners of real property, the Court held that there was no reason not to extend the liability if the “issues of indeterminate liability and policy can be adequately dealt with”.
Mr Chew clearly understands the issues and the dilemmas and ultimately properly observes that:
[R]ealities dictate that Singapore needs classification societies. As a major port, Singapore’s economy would be affected if the classification societies cease operations due to the imposition of negligence liability. This may form a policy ground for refusing to impose a duty of care. However, this concern may be invalid as classification societies may well welcome imposition of such liability as a boon to their reputation and to weed out sub-standard competition.
The authors believe that, instead of tort liability the self-regulatory system the class societies comprehensively manage, amplified by the plethora of outside auditors – all with a large stake in class performing at the highest levels – is the very best way to ensure that class does its work in the proper manner without diversion by protracted litigation with the attendant massive costs.
France
Mr Chew makes reference to the 2008 decision of the French trial Court, following the “Erika” incident, holding that RINA, the Italian classification society, was negligent in carrying out its duties and was a cause of the casualty. The Appeals Court, however, while upholding the decision on liability with respect to RINA, in a decision decided after Mr Chew’s article was published, recognised that RINA, in its classification and survey work, was performing public functions that entitled it to governmental immunity (in that case, however, it held that RINA had waived such immunity.
Conclusion
We have tried to set out above that the class system works in a quasi-inverted manner compared to the relationship between, for example, the owners of bunkers and analytical chemists.
Classification societies provide rules, both for the construction of vessels and their maintenance in service. It is the vessel owner who chooses to adhere to these rules. The owner adheres to rules of classification societies because he must obtain classification certificates, which he can present to third parties, such as hull and machinery underwriters, P & I Cubs, charterers and banks. Some owners may feel that requirements of classification societies are excessive and involve them in higher costs than they would like, but they cannot trade their ships without the societies’ certificates.
While Mr Chew appears to be grasping this unique relationship, his confidence is less than that of the authors, who believe that the Class system can only function efficiently along the lines on which it is being operated at the present time. It is a generally accepted fact that a vessel owner has a non-delegable duty to maintain his vessel in a condition in which it can carry out its intended service safely and efficiently. Classification societies provide the tools whereby this is made possible.
Given the fact that classification societies’ surveyors have limited and relatively infrequent access to vessels, it must be up to owners to monitor the condition of their vessels on an ongoing basis, carry out running maintenance and immediately report to the societies any matter which may affect the classification status of their vessels. The unfortunate fact remains that not all owners are prepared to stick to these relatively simple procedures. On the contrary, defects are sometimes concealed and these will, most likely, be undiscoverable by even the most diligent surveyors. There are other instances an owner may fear that his ship will be placed “off hire” if he reveals a minor defect which may not even require immediate repair, but will be noted in the ship’s classification records.
There is room for criticism of certain aspects of the class system. Nevertheless, it functions efficiently most of the time. There are less than perfect ship owners and not all classification society surveyors are paragons of virtue. Perhaps the relationship between classification societies and owners may be compared to marriage as an institution - by no means perfect but the best option available.
► Ken Abel3
K. Abel & Partners London
E-mail: [email protected]
►John Grimmer4
John Grimmer & Associates, New York
E-mail: [email protected]
Notes