NO CLAIM AGAINST VESSEL FOR LOAN TO VESSEL OWNER


In a previous article published in Fishing Industry News (‚ÄúPrice is King‚ÄĚ) we focused on the terms of loan and supply agreements and in particular the importance of price determination.

 

Another equally important issue is how the lender would proceed against the borrower under such an agreement in the event of a breach and in circumstances where the borrower is also the owner of the catching vessel.

 

In brief our courts have the usual Common Law jurisdiction but in terms of the Admiralty Jurisdiction Regulation Act (AJRA) they also have an Admiralty Jurisdiction in respect of maritime claims. This Admiralty Jurisdiction allows for the arrest of a vessel either to proceed against the vessel in an action or as security for an action against the owner of the vessel. These remedies provided an efficient means for enforcing a claim under an agreement and the arrest requires proof of a claim merely on a prima facie basis.

 

In addition an arrest warrant for a vessel can be obtained from the court within a matter of hours. Once the vessel is arrested it can only be released if it settles the claim, brings a successful application for the setting side of the arrest or furnishes security not only for the capital claim but also for  interest for a 2 year period and for the legal costs of suit calculated to the end of the trial. Ultimately the arresting party is placed in a strong position which could force the vessel owner to reach an amicable settlement in order that the vessel can continue its operations.

 

However to proceed with an arrest of a vessel under Admiralty Jurisdiction the underlying claim must fall into the definition of a maritime claim in terms of the AJRA. The AJRA has a list of various maritime claims against the vessel including a general catch all claim which is stated to be as follows:

 

‚Äúany other matter which by virtue of its nature or subject matter is a marine or maritime matter, the meaning of the expression marine or maritime matter not being limited by reason of the matters set forth in the preceeding paragraphs;‚ÄĚ

 

On the face of it this cover-all definition appears very wide and one would assume that it would cover many different types of claims where a vessel was involved. However recent case law has shown that the courts are interpreting the definition of a maritime claim and in particular under this catch all section on a very narrow basis.

 

In the 2006 case of the MFV ‚ÄúGalaecia‚ÄĚ the Durban High Court¬† held that there was not a maritime claim in a situation where the owner of the vessel had sold a consignment of Patagonian tooth fish to the buyer (being the arresting party). The consignment was seized upon import into the United States and forfeited due to the fact that there was incorrect or faulty documentation submitted by the vessel owner to the purchaser. The documentation related to the catching activities of the vessel. The court held that the contract was simply one of purchase and sale of frozen fish. The court went¬† further to state that the mere fact that the subject matter of the claim is fish caught by a fishing vessel in the sea cannot in the courts view bring the arresting party home under the provisions of the AJRA.

 

In a more recent¬† 2014 case¬† in the Durban High Court the arrest of the MFV ‚ÄúEl Shaddai‚ÄĚ (ironically also a Patagonian tooth fish vessel) was set aside by the court. The arresting party had loaned money to the vessel owner in order for the vessel owner to fund the carrying out of its commercial fishing operations. The agreement also provided for the repayment of such loan out of the proceeds of the vessels fishing operations. Notwithstanding the apparently wide provisions of the AJRA the court interpreted such provisions restrictively and held that the agreement was simply a loan agreement which did not give rise to a maritime claim notwithstanding that the repayment of the loan was to be from the proceeds of the fishing operations.

 

The court in this matter quoted from the textbook ‚ÄúAdmiralty Jurisdiction Law and Practice in South Africa‚ÄĚ by Gys Hofmeyr and stated as follows:

 

‚Äú‚Ķ it is important to note that the special rule and procedures relating to the exercise of admiralty jurisdiction are justified by the need to accommodate peculiarities of admiralty matters. There is no need, nor should there be any desire, to extend admiralty jurisdiction to matters which have what the learned author refers to as no meaningful maritime connection, and by which I would understand him to mean the extension of admiralty jurisdiction to matters which can otherwise easily be dealt with within the usual jurisdiction of the High Court.‚ÄĚ

 

In the circumstances, it is clear that lenders under a traditional loan and supply agreement in the fishing industry should not just assume that they have a right of arrest of the catching vessel in the event of a breach. Depending on the circumstances it may be that in future agreements of this nature can be structured in a different way so as to preserve the advantage of having a maritime claim and the remedies that arise there from (i.e. arrest). For instance it may be more prudent to pay for and supply the vessel with necessaries instead of simply loaning funds to the owner to cover operating expenses. The supply of necessaries would constitute a maritime claim and allow for proceedings under admiralty jurisdiction. However, a failsafe method of providing a maritime claim would be for the registration of a marine bond over the vessel which of course is a maritime claim under the AJRA. But a supply of necessaries claim ranks higher against a vessel than a marine bond should the vessel be arrested and sold in admiralty.

 

There is certainly some food for thought with regard to loan and supply agreements and the restructuring thereof to provide for more effective remedies.

 



JULY 2015 ~ VHF RADIO REQUIREMENTS


VHF Radio requirements¬† –¬† compliance with the Merchant Shipping Act and Regulations , in light of Marine Notice 4 of 2015.

In 1979, the International Convention on Maritime Search and Rescue was drafted, which called for development of a global search and rescue plan. In addition a resolution was passed calling for development by IMO of a Global Maritime Distress and Safety System (GMDSS) to provide the communication support needed to implement the search and rescue plan.

The GMDSS was developed by the International Maritime Organization (IMO), the specialized agency of the United Nations with responsibility for ship safety and the prevention of marine pollution, in close co-operation with the International Telecommunication Union (ITU) and other international organizations, notably the World Meteorological Organization (WMO), the International Hydrographic Organization (IHO) and the COSPAS-SARSAT partners. The IMO amended the Safety of Life at Sea (SOLAS) Convention in 1988, and required ships subject to it to fit GMDSS equipment. The regulations governing the GMDSS are contained in the International Convention for the Safety of Life at Sea (SOLAS), 1974. The GMDSS requirements are contained in Chapter IV of SOLAS on Radio communications and were adopted in 1988..

Ship distress and safety communications entered a new era on 1 February 1999 with the full implementation of the GMDSS, which is an integrated communications system using satellite and terrestrial radio communications to ensure that no matter where a ship is in distress, aid can be dispatched. Furthermore the¬†GMDSS provides an internationally agreed-upon set of safety procedures, types of equipment, and communication protocols used to increase safety and make it easier to rescue distressed ships, boats and aircraft. The system is intended to perform the following functions: alerting,¬†search and rescue¬†coordination, locating, maritime safety information¬†broadcasts, general communications, and bridge-to-bridge communications. Specific radio carriage requirements depend upon the ship’s area of operation, rather than its tonnage. The system also provides redundant means of distress alerting, and emergency sources of power. In addition this system ensures the provision of Maritime Safety Information (MSI), both meteorological and navigational information, on a global basis at sea.

On the 10 March 2015, SAMSA issued Marine Notice No. 4 of 2015, titled ‚ÄúCessation of 29 Mhz SOLAS Distress Watch Keeping by Telkom Maritime Services‚ÄĚ. The marine notice was addressed to all regional managers, principal officers, small vessel skippers and operators, small vessel owners and affected parties and outlines the changes to Maritime Radio SOLAS watch keeping by Telkom Maritime Services and the changes in radio carriage requirements by small vessels ensuing from these changes. The notice provides some background stating that the Department of Transport renewed its SOLAS Service Agreement with Telkom on the 14th January 2014, in terms of which Telkom Maritime Services provides SOLAS distress watch keeping and Maritime Safety Information Services.

The SOLAS Service Agreement will be fully implemented by 01 July 2015 and South Africa shall be declared GMDSS Sea Area A1, which is defined as:

‚ÄúA coastal area within the radiotelephone coverage of at least one VHF coast station in which continuous DSC alerting is available‚ÄĚ.

Consequently, the existing analogue shore based radio equipment will be replaced by digital equipment. The old Voice-only VHF equipment is the traditional type, which relies entirely on the human voice for calling and communicating. Large commercial vessels are already required to carry digital equipment in terms of theMerchant Shipping (Radio Installations) Regulations, 2002. But for small vessels to interact with the digital equipment, a VHF radio with Digital Selective Calling capability is required, which will also ensure interoperability between all vessels. DSC is an advanced, computerized form of VHF and MF radio designed for marine use. They have all of the capabilities of the earlier radios and a number of new features that can add dramatically to the safety aspects and the usefulness of marine communications.

DSC automates many aspects of radio communication, for instance a user can make a distress call without using a handset, just by pressing one button on the radio. A DSC distress alert sent on VHF CH 70 will then automatically supply any shore based rescue centre and other vessels in the area with your identification and your location. In this manner the DSC radio operates much like an EPIRB that sends encoded “maydays” directly to satellites. You can even dial in the reason for the distress call. DSC will automatically repeat the distress call until it is acknowledged, useful in situations where the skipper is disabled.¬† If no shore-based emergency response station is within range, the DSC distress transmission will bounce from one DSC/VHF-equipped radio to another until it finds a shore-based station that returns an acknowledgement of your distress. By bouncing from one DSC/VHF radio to another, your distress signal can travel long distances, since each radio in the sequence repeats the signal. These digital communications result in visual messages being displayed on a receiver‚Äôs display screen similar to information displayed on a computer‚Äôs monitor.

If you make a digital call of any kind using DSC, your radio transmits the message on Channel 70; thus relieving congestion on Channel 16. All DSC equipped marine radios can be connected to a GPS, so your radio is ‚Äúfamiliar‚ÄĚ with your exact location and the exact time and sends out this information with a distress call. This in effect takes the ‚Äúsearch‚ÄĚ out of ‚Äėsearch and rescue‚Äô.

DSC calls can be made directly to another vessel without broadcasting; thus being more private like a telephone call. As stated earlier, a DSC call does not use Channel 16. If the call is directed to an individual station, then that signal is sent on Channel 70 and only that station receives the call. The call can include the channel number on which you want to hold an ordinary conversation. Channel 70 is only used for digital communication; you cannot use voice on that channel. Furthermore you can store numbers that connect you to other vessels and your radio can keep a log of calls.

Much like a telephone, DSC radios must each have their own ‚Äúcontact‚ÄĚ number referred to as the Maritime Mobile Service Identity number (MMSI). The MMSI number is nine digits long. The first three digits indicate the country followed by another six digits which are unique to the marine radio.

The Marine Notice states that Telkom Maritime Services will maintain VHF CH 16 aural watch keeping until April 2018 to allow all vessels to make the transition to DSC carriage. However, 29 Mhz and 2182 khz aural watch-keeping by Telkom will cease with effect from 01 July 2015.

Turning to the legal side of this article, the Merchant Shipping (National Small Vessel Safety) Regulations 2007 (NSVSR) applies to-

(a) every commercial small vessel-

(i) that is registered as a ship in the Republic in terms of the Ship Registration Act, 1998 (Act No.58 of 1998);

(ii) that is required to be licensed in terms of section 68 of the Act; and

(iii) in respect of which a local general safety certificate is required by virtue of section 203 of the Act.‚ÄĚ

The definition of a ‚Äúcommercial small vessel‚ÄĚ contained in the NSVS regulations read with definition of¬† a ‚Äúsmall vessel” as described in the Merchant Shipping Act means a vessel of less than twenty-five gross tons and of more than three metres in length that is not a pleasure vessel, hence its application to small fishing vessels.

All commercial vessels must be either licensed or registered. Where any South African owned vessel leaves the South African Exclusive Economic Zone (200NM from land) they must be registered in accordance with the Ship Registration Act 1998.

Section 23 of the Marine Living Resources Act 18 of 1998 provides that no person shall use a fishing vessel or any other vessel to exercise any right of access unless a local fishing vessel licence has been issued to such person. Therefore in order to operate a local fishing vessel in South Africa, the vessel must be registered or licenced with the South African flag state. You must apply for a safety certificate from the South African Maritime Safety Authority and a fishing vessel licence from the Department of Agriculture, Forestry, and Fisheries in Cape Town.

Item 18, Annexure 2 of the Merchant Shipping (National Small Vessel Safety) Regulations 2007 requires category A, B, C and D vessels, subject to the regulations, to carry a Marine VHF radio or a 29 Mhz radio. These categories of vessels cover those operating any distance from shore to those vessels operating less than 5 nautical miles from shore. However, due to the cessation of the SOLAS watch keeping by the South African coast stations on 29 Mhz it will no longer be appropriate for small vessels to carry 29 Mhz radios as a safety option in terms of the Regulations. Categories of vessels covered by these regulations will now have to be equipped with VHF Marine Radios to comply with the safety requirements.

Moreover, NSVSR regulation 7 mandates that the owner and skipper of a vessel must ensure that items of safety appliances and equipment are provided and maintained on board the vessel in accordance with the requirements of Annexure 2 (as discussed above). Every person who contravenes this regulation commits an offence in terms of regulation 34 and is liable on conviction to a fine or imprisonment for a period not exceeding 12 months. Furthermore the failure to equip a VHF DSC marine radio on a vessel will result in the vessel being unable to obtain a Certificate of Fitness (COF), and those vessels issued with certificates may have them cancelled by SAMSA. This will result in vessels being confined to port as they may not be operated anywhere in the Republic without a COF and doing so once again amounts to an offence in terms of the NSVS Regulations.

The Marine Notice concludes by stating that, vessels may continue to carry 29 Mhz radios as voluntary fit equipment for intership communications, communications with clubs etc., however, these radios will no longer be appropriate to fulfil the safety requirements of the regulations from 01 July 2015.

In light of this notice we advise that all vessel owners, making use of 29 Mhz radios or old non DSC enabled VHF radios, adhere to SAMSA’s recommendations and replace their radio with a VHF DSC capable marine radio to ensure compliance with the regulations and more importantly to safeguard life at sea.