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8/10/2019 Lehmann Timber Case Prof_Schwampe
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IUMI Professional Partners since 2010
The English Court of Appeal in theLEHMANN TIMBER case
Just another interesting court decision, orreason for cargo underwriters concerns?
Prof. Dr. Dieter Schwampe
Dabelstein & PassehlHamburg/Germany 1
8/10/2019 Lehmann Timber Case Prof_Schwampe
2/17
IUMI Professional Partners since 2010
LEHMAN TIMBER - the Facts
Maiden voyage China / Europe
Two consignments:
Hatch covers for Germany 1.089 steel coils under 4 bills of lading for the same consignee in
St. Petersburg / Russia
Captured by Somali pirates 28 May 2012
held hostage for 42 days
After release main engine damage on way to Salalah as port of refuge
General Average (GA) declared
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8/10/2019 Lehmann Timber Case Prof_Schwampe
3/17
IUMI Professional Partners since 2010
LEHMAN TIMBER - the Facts
GA Securities (Bond and Guarantee) requested
Hatch covers: Bond and Guarantee provided cargo discharged in Germany
Steel coils:
Guarantee provided for 98 coils under B/L No. 4No guarantees provided for remaining coils
No bond provided for any coil
Advice to shipowner: imminent risk of arrest in case of call at St. Petersburg
Vessel diverts and arrives 28 September 2012 at Hamina / Finland
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8/10/2019 Lehmann Timber Case Prof_Schwampe
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IUMI Professional Partners since 2010
LEHMAN TIMBER - the Facts
October 2012: discharge of steel coils into warehouse under control ofship owners
Monthly costs: USD 20.000
Cargo interests do not pay
Shipowner starts legal action in London
7 June 2013: Cargo still at Hamina, when Court of Appeal renders decision
Storage charges accrued: > USD 1,000,000
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8/10/2019 Lehmann Timber Case Prof_Schwampe
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IUMI Professional Partners since 2010
The Court of Appeal: Leave St. Petersburg roads for Hamina?
Issue relevant only for the 98 coils?
Perfectly legitimate to leave
Owner may demand a GA Bond even when holding a GA Guarantee
If no Bond is provided, Owner may exercise his rights
No need to run risks when exercising rights
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8/10/2019 Lehmann Timber Case Prof_Schwampe
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IUMI Professional Partners since 2010
Legal Literature: Recover the Storage Fees?
Lowndess & Rudolph:
In the absence of a contractual provision to thecontrary the shipowner must enforce the lienat his own expense;
If he were to land and store the goods, or deposit them
with a wharfinger, the cost cannot be recoveredfrom the consignee
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8/10/2019 Lehmann Timber Case Prof_Schwampe
7/17IUMI Professional Partners since 2010
Legal Literature: Recover the Storage Fees?
Cooke/Kimball/Young a.o.
Absent express agreement to the contraryit is a general rule that costs of retaining
possession of goods in the exercise of a lienare not recoverable from their owner.
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8/10/2019 Lehmann Timber Case Prof_Schwampe
8/17IUMI Professional Partners since 2010
The Court of Appeal: Recover Storage Costs?
Perfectly legitimate: right of recovery
No principle in common law that lienor must bearthe costs of exercise of the lien
Only existing case law ( Somes v. Empire Shipping , 1858)relates to a special case and does not lay down a rule
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8/10/2019 Lehmann Timber Case Prof_Schwampe
9/17IUMI Professional Partners since 2010
Consequences for the Cargo Insurer?
Do not lose time to issue your Guarantee it may become expensive
Recoverable costs are not only those of storage, but likely also loss of earnings
Owner may exercise lien even with Guarantee of Cargo Underwriters in hands, ifno GA Bond has been issued
The BIG Question: Does the Cargo Underwriter pay the shipowners costs toexercise the lien?
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8/10/2019 Lehmann Timber Case Prof_Schwampe
10/17IUMI Professional Partners since 2010
Consequences for the Cargo Insurer?
Wording of a usual GA Guarantee form:
hereby guarantee to pay to the shipowners or to the Average Adjusters, ABC
Average Adjusting Company, London, on behalf of the various parties to theadventure as their interests may appear, any contribution to General Averageand/or Salvage and/or Special Charges which may hereafter be ascertained to be
properly and legally due in respect of the said goods.
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8/10/2019 Lehmann Timber Case Prof_Schwampe
11/17IUMI Professional Partners since 2010
Consequences for the Cargo Insurer?
hereby guarantee to pay to the shipowners or to the Average Adjusters, ABC
Average Adjusting Company, London, on behalf of the various parties to theadventure as their interests may appear, any contribution to General Averageand/or Salvage and/or Special Charges which may hereafter be ascertained to be
properly and legally due in respect of the said goods.
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and/or Special Charges
8/10/2019 Lehmann Timber Case Prof_Schwampe
12/17IUMI Professional Partners since 2010
Consequences for the Cargo Insurer?
GA Adjusters start treating expenses for exercise of liens as special charges
GA Guarantee binds cargo underwriter regardless of cover conditions
If there is no cover for the costs: pay first and then run after your money
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8/10/2019 Lehmann Timber Case Prof_Schwampe
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8/10/2019 Lehmann Timber Case Prof_Schwampe
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IUMI Professional Partners since 2010
Ways to avoid this?
Issue your guarantee only once the Bond is placed? No
Amend insurance conditions: provides only secondary rights
Amend wording of GA guarantee
hereby guarantee to pay to the shipowners or to the Average Adjusters, ABC Average Adjusting Company, London, on behalf of the various parties to theadventure as their interests may appear, any contribution to General Averageand/or Salvage and/or Special Charges , un less du e to de layed su bm iss ionof a Genera l Average Bo nd , which may hereafter be ascertained to be
properly and legally due in respect of the said goods.14
8/10/2019 Lehmann Timber Case Prof_Schwampe
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IUMI Professional Partners since 2010
Ways to avoid this?
Issue your guarantee only once the Bond is placed? No
Amend insurance conditions: provides only secondary rights
Amend wording of GA guarantee
Qualify your GA Guarantee
please find attached our general average guarantee. It is submitted in theunderstanding and under condition that it shall not cover any costs incurred as aconsequence of a delayed submission of a General Average Bond
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8/10/2019 Lehmann Timber Case Prof_Schwampe
16/17
IUMI Professional Partners since 2010
Resum
Owners may exercise lien if no GA Bond is placed
Cargo Underwriters are liable under their GA Guarantees
Amendment of insurance conditions do not really solve the problem
Solution possible only in the context with the GA Guarantee but difficult
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8/10/2019 Lehmann Timber Case Prof_Schwampe
17/17
IUMI Professional Partners since 2010
Thank you for your attention
Please feel free to direct questions or comments to
Prof. Dr. Dieter [email protected]
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