Case Study

1/2023

We at Interport Maritime Limited would like to draw the attention of the Clubs and their Members (Shipowners) to a recent collision incident that occurred at Kutubdia anchorage (Chattogram Port), which can provide insights into dealing with similar matters in Bangladeshi ports.

During the passage to the 'Alpha' anchorage, a mother vessel encountered numerous lighter vessels, unlit small crafts, and wooden country boats, which impeded its safe passage. The vessel collided with an unlit lighter vessel, resulting in extensive damages to both vessels. Upon notification, we were immediately instructed by the P&I Underwriter of the mother vessel to appoint a suitably qualified marine surveyor to investigate the incident's circumstances and to protect the shipowner's interests.

At the outset, the Master of our vessel issued an apposite letter of protest (LOP) being assisted by our surveyor. Excerpts from the statements of facts (SOF) read:

“Vessel continued to approach towards the chosen anchor ground of anchorage ‘A’. Numerous small vessels, fishing boats, and lighter vessels were observed anchored, underway, crossing, and engaged in various activities at the anchorage area. Most of the said small crafts were noticed with no navigation lights and AIS”

“The lighter vessel was not traced in the Radar and couldn’t be seen by the bridge team due to poor visibility. Details of the lighter vessel could not be identified”

Excerpts from the independent survey report of our surveyor read similarly:

“Reportedly, during the approach to anchorage ‘A’, numerous anchored and underway unlit lighter vessels, fishing boats, and country boats were impeding the safe passage of the vessel.”

“Reportedly, as there were high dense traffic and reduced visibility, an additional lookout was engaged at wheel house and forward station.”

“…the opponent’s lighter vessel was apparently at anchor during the incident which is unlawful and the lighter vessel did not display any working light and navigation light/anchor light.”

A few days after the date of the incident, the owners of the lighter vessel came up with a highly inflated claim of several million US dollars including claims for delays/business loss due to anticipated time loss for effecting repairs (which took the lion’s share of the claim quantum), and sent a letter to the Port Authority requesting not to issue NOC/Port Clearance for our vessel’s sailing. We repudiated the letter after our independent marine surveyor submitted the facts and also sent a copy of the same to the Port Authority. We further clarified to our Members that the Port Authority cannot detain a vessel without having any arrest order or court order.

We thereafter sent a WP (Without Prejudice) invite to the lighter vessels’ interests as per industry best practice to conduct joint damage surveys on both our vessel and their vessel, to determine the actual nature and extent of damages caused due to the incident and to separate same from any “pre-existing damages” to protect our Members interests, which was duly conducted.

However, the owners of the smaller vessel further reported the incident to the Port State Control (PSC) through their local contacts. PSC inspectors subsequently boarded our Members' vessel to conduct a survey.

When we were informed of this by the Club, we immediately enlisted the help of our senior in-house Surveyor, who is well-respected in the maritime community, to speak to high-level PSC officials. He provided them with the facts obtained during the incident and explained the circumstances surrounding it. He also requested that the vessel not be detained due to unfounded claims by the opponents. Following the discussion with our in-house Surveyor, the PSC inspector completed the survey and only identified two minor deficiencies, which were promptly addressed and closed.

The owners of the lighter vessel subsequently filed an admiralty suit against the Members seeking compensation for damages and business losses, and Admiralty Lawyers were appointed by the Club to file a caveat against the arrest of the mother vessel and to defend the suit. In the interim, we tried to settle the claim amicably on a Without Prejudice basis through official channels with the opponents in order to reduce the claim amount and also offered a Club Letter of Undertaking (LOU) as security for the release of the mother vessel. However, the opponents demanded a cash settlement for the full amount of the claim and denied accepting the Club LOU. We therefore decided the next best course of action would be to proceed with the litigation and seeking the court’s further direction to have the mother vessel released by reducing security.

The mother vessel finally sailed out by submitting a Bank Guarantee (BG) covering less than half the value of the original claim. During the lawsuit, we further continued negotiations to settle the matter out of court based on the gathered facts and evidence. After more than a year of negotiations, the claim amount was significantly reduced from several million dollars to less than a couple hundred thousand dollars, a quantum that was close to our surveyor’s estimate for the damages sustained by the lighter vessel. Finally, the parties signed a Settlement Agreement, the claim amount of which was remitted to the claimant's bank account, and the suit was dismissed.

Thanks to the support of the Club and its Members, we could play a crucial role in resolving the matter. We successfully refuted the initial claim and then entered into a series of carefully planned negotiations that spanned over a year, which helped to bring down the claim amount significantly, preventing costly and time-consuming legal proceedings, which can take many years to conclude in Bangladesh, due to the lengthy nature of trials.

Reflections from the case:

• Unexpectedly, the barge interests did not issue any letter of protest or a claim letter initially. However, they came up with a very large claim at a later stage, like a sudden ambush.  Had the owners not appointed a competent marine surveyor to investigate the matter and retain contemporaneous evidence in relation to the incident, we would be caught off-guard and may not have been able to defend our Members and repudiate opponents’ claims so effectively

• The settlement was reached amicably and out of court, which allowed the Shipowners to cancel the Bank Guarantee and stop incurring further interests just before charging the same for the following year. This approach saved both parties' time and resources, and the matter was resolved efficiently

• Although apparently, the lighter vessel was at fault for the incident, they raised a spurious claim accusing the mother vessel, which was unrealistic and significantly higher than our surveyor's estimation. This overestimation of damages caused unnecessary delays in the negotiation process. However, we strongly repudiated their inflated claim as their claim statement could not provide any documentary evidence of the business loss. We stood firm on the proposed settlement amount put forward by the Club and our members, while also offering a nominal increase. This strategy helped to bring down the overall claim figure. Our approach demonstrated a willingness to negotiate, but not at the expense of paying an unrealistic amount that lacks any justification.

• Our threat of counterclaim for damages arising out of wrongful arrest was also vital in the negotiation tactics in order to compel the claimants to behave reasonably. With the help of our lawyers, we cited the case of Gulf Azov Shipping Co Ltd. and another V Idisi and another [2001] EWCA Civ 505, which held that the amount claimed for vessel arrests needs to be justified by the arresting party and that arresting a vessel for a long time over an overwhelming and false amount is itself culpable, and the arresting party can be prosecuted for wrongful detention of the vessel. We made it clear to the opponents that our Members will, on the back of strongly favorable legal opinion, vigorously pursue their claim against them, not only for the realization of the repair costs for the damages sustained to our mother vessel but also for all operational losses suffered as a result of their wrongful arrest

• Patience and persistence were the key strategies in this negotiation. Thanks to the Club's and Members' (Shipowners') support, Interport Maritime Limited remained committed to negotiating a reasonable settlement. As a result, we were able to significantly reduce the claimed amount to a quantum close to our surveyor's estimate for the damages sustained by the lighter vessel.

- Engr. Tanjil Ahmed Ruhullah, CMILT, MNI

Managing Director, Interport Maritime Ltd. (As Correspondents)

Date: 18 April 2023