Maritime Law Update
South Africa 2002
Author: JOHN HARE
Professor of Shipping Law at the University of Cape Town
Director: Shepstone & Wylie 1 , Cape Town
At a different time in a different place I have spoken and written about the two industrial revolutions through which the shipping industry has passed in our own lifetimes. 2 The container revolution of the 70's redefined the carriage of goods by sea and by land. Today's electronic revolution leaves us grappling with a technology that mutates by the hour. It brings with it daunting complexities and challenges for those who now seek to make a living from the business of shipping.
Put these two revolutions in the context of the South African political silent revolution that brought about fundamental change in this country during the 90's and you have a situation in which the local shipping industry was bound to have undergone a metamorphosis, accompanied by some serious fall-out.
Largely through the efforts of a very active South African Maritime Law Association 3, with sound support (initially at least) from the new South African government, shipping law in South Africa has seen much innovation. But the rush of enthusiasm in the immediate post-1994 years has unfortunately waned, and too often one is left with the feeling that the Pretoria-based government forgets sometimes that we have a coastline. Much of the reform legislation and policy formulated in the 1990's remains stuck in the government legislative and administrative pipe.
A fully consultative transport policy initiative which reported to the Minister of Transport in 1996 and which formed the basis of the White Paper on Transport, made important recommendations relating to maritime transport. 4. Some have been implemented, but much of the legislation to which the Report and White Paper gave rise, has not come to full fruition. Notwithstanding, the Department of Transport Affairs has now commissioned a further Consultative Report on Maritime Transport Policy. Consultation with the industry has begun anew, and hopefully the report will have the result at the very least of re-focussing government attention on the maritime transport industry. But there should be far better follow-through. There is too much talk and not enough action. More consultation is sometimes just an excuse to postpone the reality of dealing with issues.
One of the main thrusts of the 1996 maritime transport policy report was that the government and business should do all in its power to stimulate the growth of a South African shipping industry. We have, for example, huge potential for supplying the world with well-educated and trained English speaking seamen and officers. But setting up a training scheme requires government commitment - which has not been forthcoming. And the industry shot itself firmly in the foot when it allowed the country's largest shipping operation, with the largest locally owned blue water fleet, to fragment into foreign ownership. What took 50 proud years to build up, was dumped by an institutional majority shareholder in an equal number of days - at a bargain basement price. The haemorrhaging of local ownership is not stopping there. It is continuing at a pace that will soon result in our having no significant local deep-sea shipowners at all. No local ships mean no local cadets. How can you train a merchant navy with no ships? I feel we have lost the battle.
How does this relate to what I should be speaking about - 'Developments in maritime law in South Africa'? Shipping law should serve the shipping industry by adaptation and innovation. Once such measure involved taking up the challenge of the 1996 policy report by modernising South African ship ownership and registration. And removing undoubted anomalies that have beset the South African ship's mortgage. The Ship Registration Act 5, based largely on modern English ship ownership law, removed the inflexible parochial approach of the 19th century legislation which we have had up to now. The new Act will allow for foreign joint venture ownership of South African registered ships, provided that the majority shares in the ship are locally owned. It allows for ships chartered in for longer than 5 years to be registered here as a second register. It provides for a fully centralised and computerised register, more readily available and better administered. It corrects uncertainties about the creation and ranking of locally registered ship's mortgages. And it includes a host of other measures designed to make the formalities of South African ship ownership more attractive. The Act was passed by Parliament in 1998. But it has not yet come into effect, four years later. It apparently now lacks only the licensing regulations for small craft before it will be published into law. 6
And whilst on the subject of ranking, the South African ranking of maritime claims differs from most of the rest of the maritime world. In particular, it ranks the mortgagee behind the ship repairer and the supplier of necessaries. That the latter two categories of creditor need protection locally is undeniable. But a working compromise was reached years ago, involving the creation of a 3 month window of priority for the necessaries man and the repairer. Yet the amendments to the Admiralty Jurisdiction Regulation Act 7 worked out by the MLA and subjected to broad discussion and lobbying have now been with the state law advisors for three years.
A similar situation pertains to the new Sea Transport Documents Act. 8 The Act is the product of many months of work and of consultation led by members of the MLA. The Act was assented to by the President and published by Government Gazette 9 in December 2000 - yet it has still to be published into law. I understand that the Notice of Commencement was drafted and sent to the office of the State President more than a year ago. The Act removes any doubt about whether or not in South African law a consignee of goods shipped by bill of lading or other shipping contract has title to sue the carrier. Until the Act becomes law, a local consignee needs to rely upon the imperfect authority of the old English Bill of Lading Act of 1855 in order to enforce its claims against a carrier. 10 Hardly a satisfactory situation.
Undoubtedly the most serious lapse of legal housekeeping in this country is the continuing recalcitrance, reluctance, or maybe just unadulterated neglect on the part of the South African government to take advantage of the significantly higher limits of liability for oil pollution, which current international conventions allow. The South African oil pollution liability regime is based largely upon the 1969 CLC convention. 11 Thus the cap on oil pollution liability for any one pollution incident is currently 14 million SDRs. 12. At current rates of exchange, this amounts to slightly less than R200m. If South Africa accedes to the Fund Convention (which would require denunciation of CLC and which has a one-year lead-in time), South African claimants would have available a fund of close on R2000m. And, once proposed increased limits come into effect in November 2003, the pot increases to R3000m.
Here too, the bureaucrats have let down the lawyers. Accession to the Fund Convention regime requires disclosure of oil import figures and sources. The web of apartheid politics precluded such disclosure until 1994. In October 1996, as the then president of the South African MLA, I wrote to the Ministry of Transport setting out the steps required for accession, and recommending immediate steps to bring the Fund Convention into South African law. It is a call I have frequently repeated 13. The process was initiated by SAMSA 14 in the late '90's, and accession was approved by working committees of both Houses of Parliament. But the documentation was then lost. When I again took the matter up with the Minister of Transport in December 2001 I was thanked for my concern, but told that this was the first the Ministry of Transport had heard of the Fund Convention. As a result, when (rather than if) South Africa has its next tanker casualty, local claimants will only be able to claim R200m in total from the shipowner and its P&I. Any further loss will have to lie where it falls - on the shoulders of the South African taxpayer.
I make these comments because I feel that a message should be given to our authorities that the constant process of updating and improving laws is a shared responsibility. The maritime legal fraternity in this country is actively committed to making our marine and shipping laws better. Much has been done. But without competent processing of these laws through the bureaucratic pipeline, we will all lose heart. And the cynics amongst us might say 'Another maritime transport policy review? What about finishing the housekeeping from the last one'.
Perhaps I should express one caveat: the fault for this failure to administer the process of lawmaking properly lies, in my opinion, with the central government and perhaps also the law advisors, and not with SAMSA. SAMSA operates outside of the inner government circle. Though understaffed, its lawyers work tirelessly for change in the maritime industry, and they bear the burden of the responsibility for preparing draft legislation valiantly and competently. 15SAMSA works very closely with the MLA. But it is let down once the paperwork passes out of its hands and beyond its control.
My carping done, let me outline some of the developments that have taken place in South African shipping law.
- Admiralty practice has seen a marked increase in decisions handed down by our High Court in admiralty, both at provincial levels and on appeal. In particular, the courts have continued to fine-tune the provision of security for arrests. South African admiralty jurisdiction allows for the arrest of a ship to provide security for a dispute to be heard locally or abroad. 16 The courts have recently grappled with what is adequate security, and how and where that security should be lodged. It has now been settled that a Club Letter 17 and a bank guarantee 18 are security under the Act, though for such security to remain within the reach of the court, it needs to be lodged locally.
Associated ship arrests seem to be proceeding smoothly, within the strict confines of court decisions setting the guidelines for the unravelling of control 19 as the determining factor for lifting the shipping corporate veil. 20
Amendments to the ranking section (sec 11) dealing with the priority of the mortgagee have slipped off the burner. South African ranking will continue to be out of line with the rest of the world until the amendments are processed.
- The Ship Registration Act, referred to above, should take effect as soon as the licensing regulations have been finalised.
- Salvage law is now settled - with the London Salvage Convention in place as an annexure to the Wreck and Salvage Act. 21 With the benefit of knowledge of the outcome of The Nagasaki Spirit at the time of drafting the Act, we were able to legislate that Article 14 'fair rate' should have a profit element. We also extended the operation of Article 14 beyond the coastline or adjacent areas so that No Cure Some Pay applies, in South African law to environmental salvage anywhere.
- Carriage of Goods law awaits the publication into law of the Sea Transport Documents Act. The Act, once having the force of law, will recognise the role played by electronic document exchange, but does not attempt any regulation of electronic commerce and shipping. It deals with formalities such as title to sue but does not prescribe a carriage liability regime. The current COGSA, incorporating the Hague Visby Rules, will remain. The South African shipping law fraternity is watching the CMI/UNCITRAL initiative to draft a new liability regime covering multi-modalism with interest. 22 The CMI/UNCITRAL efforts will have a better chance of producing a final draft convention that gains international acceptance if all of us in shipping take up our responsibility to study the drafts and make comment if we feel uneasy with any aspects. Once a convention is finalised and lies on the table for accession, it will be too late for change.
- Marine Insurance is in something of a cul-de-sac, this time through no fault of the government. At the brief of the South African Association of Marine Underwriters a draft Act has been prepared, and two workshops have been held. The drafts recognise some of the problems that face the industry, but there has as yet been very little input given to the local reform initiative by the CMI Working Group on Marine Insurance. 23 I must take responsibility here, as I chair the CMI group. I need to get busy on sharing with those responsible for the local initiative the enormous amount of research which we have done with our CMI hats on. The CMI's hope is to be able to re-establish some measure of international uniformity in aspects of the law of marine insurance by serving as a guide to national MLA's who are engaged in marine insurance reform. More than most areas of shipping law, marine insurance has common roots. National divergence from those roots has exacerbated many of the industry's problems worldwide. The CMI reform initiative has had cautious support from the London market - and indeed many other of the world's markets.
Generally, South African shipping law is practising on a level plane with a very active and interested fraternity of attorneys, advocates and in-house lawyers. Each provincial division now has a group of judges who have had shipping experience in practice, though with the enormous growth of the bench it is only to be expected that there will be more judges who are unfamiliar with shipping law. We have thus seen an increase in the number of shipping disputes being referred to arbitration, many on London terms.
What we need is a shipping lawyer in government. Or at least a sea lawyer.
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