by Dr Manique Cooray

Fires at sea continue to pose a significant risk to container shipping and often give rise to long-winded and complex claims between all affected parties. Space does not permit even a cursory examination of the large body of relevant international legal provisions available. Moreover, the rise of containerisation has exacerbated the problem of fire on board ships as we have seen with the MV Hansa Brandenburg, the Jolly Rubino, the Maersk Londrina and recently in February 2017, in the MV APL Austria case where a Liberian flagged container ship caught fire off the Eastern Cape of South Africa.

In the backdrop of the ongoing environmental catastrophe in one of Sri Lanka’s worst ever marine disasters, it is imperative to address two issues that seem to be of central importance pertaining to the cargo ship carrying tonnes of chemicals which now lie in the seabed off the west coast of the Island. The Singapore registered MV X-Press Pearl, Super Eco 2700-class container ship was built by Zhoushan Changhong International Shipyard Co. Ltd at Zhoushan, China, for Singapore based X-Press Feeders and its sister ship X-Press Mekong. The 37,000 dead weight tonne (DWT) container vessel could carry 2,743 twenty-foot equivalent units. The ship was delivered on February 10, 2021. It had a 25-member crew including Filipinos, Chinese, Indian and Russian nationals. It was carrying 1,486 containers, among them 81 carrying dangerous goods, which included 25 tonnes of nitric acid, along with other chemicals, cosmetics and low-density polyethylene (LDPE) pellets. Reports indicate the vessel was deployed in the Straits of Malacca to Middle East (SMX) service of X-Press Feeders, from Port Klang (Malaysia) via Singapore and Jebel Ali (UAE) to Hamad Port (Qatar). The return journey to Malaysia was to be via Hazira (India) and Colombo (Sri Lanka). It was reported that the ship’s crew had noticed the leakage of nitric acid from one of the containers when the vessel set sail to the Port of Colombo.

It is common knowledge that under the United Nations Convention on the Law of the Sea, no vessel can enter a country’s “territorial water” extending up to 12 miles from the nearest land without approval from the coastal state. Nevertheless, bearing in mind that Sri Lanka is a signatory to the Basel Convention, it is not the aim here to address basic questions on how, why and who authorized a vessel with a container leaking nitric acid to enter the territorial waters of the country carrying hazardous material. This entry into Sri Lankan waters could have been under “Port of Refuge”, a situation wherein a ship deviates to a port due to an emergency which renders the ship unsafe to continue on her voyage.

The ill-fated ship erupted in a fire while anchored about 9.5 nautical miles northwest of Colombo. The Sri Lankan navy believes the fire was caused by a chemical reaction from the leaking cargo loaded from the port of Hazira in India. As flaming containers laden with chemicals fell from the ship’s deck, seawater may have entered the hull that submerged the MV X-Press Pearl’s quarterdeck a day after firefighters extinguished the fire. With such a dramatic turn of events of an overseas registered ship, carrying crewmen of various nationalities and cargo belonging presumably to various parties, and with a vessel located within the territorial waters of Sri Lanka, presents itself a plethora of issues in conflict of laws determining principles of choice of law with recognition and enforcement of foreign judgments.

While the local authorities are moving to sue the owners of the vessel to claim damages from the insurer, the suitability of existing Penal Provisions and the Marine Pollution Prevention Act No 35 of 2008 of Sri Lanka raises the question of its adequacy as the principle legislation of the forum state to hear a case of such magnitude of which the main issue is to claim compensation. Insurers of cargo vessels generally require the owners and operators to adhere to internationally recognized guidance concerned with maximizing the overall safety of the vessel, the crew and the cargo. One part of the guidance is the International Maritime Organizations Dangerous Goods Code (IMDG Code), an internationally accepted guideline for the transportation or shipment of dangerous goods or materials by a vessel on water.

Even a cargo that might be quite innocuous in small quantities can display dangerous properties when transported in large quantities, especially if those large quantities of material are exposed to environmental conditions such as moisture or heat, during or prior to loading, or during a voyage. Under the Hague-Visby Rules, the liability regime for the carriage of most cargo, neither the carrier nor the shipowner is responsible for loss or damage arising or resulting from fire unless caused by the actual fault or privity of the shipowner or carrier. To successfully recover for damage to cargo from the shipowner or to defend a claim for general average, the cargo owner must show a lack of due diligence of the shipowner to make the ship seaworthy and safe to receive, carry and discharge the cargo. From a procedural perspective, “(i) the cargo owner must prove their loss; (ii) the carrier or shipowner must prove the cause of loss (i.e., that the fire caused the loss); (iii) the carrier or shipowner must prove due diligence to make the ship seaworthy prior to and at the commencement of the voyage; and (iv) the cargo owner must prove fault of the carrier or shipowner or knowledge of fault or another for whom the carrier or shipowner is responsible.”

The shipowner is not liable for an act or omission by the crew. If the negligence of the crew caused the fire, this is a complete defence for the shipowner unless the cargo owner can show that there was some lack of due diligence by the shipowner, which made the ship unseaworthy. In the case of fires at sea, this would include the shipowner failing to exercise due diligence insofar as the crew fighting the fire is concerned, a lack of adequate firefighting systems, lack of training, or lack of procedural guidance from owner or carriers to the crew. Cargo owners are also likely to be successful in claiming against a shipowner where it is shown that the shipowner or carrier failed to correctly stow dangerous or hazardous cargo (provided that such cargo was correctly declared) in accordance with IMDG guidelines. In the event a shipowner can rely on a “fire defence”, the cargo owner (or their insurers) may be left with a recovery action against the shipper of the miss declared cargo. However, this often involves expensive litigation in a foreign jurisdiction where the “guilty” shipper may be a brass plate company without any assets to satisfy millions of dollars worth of damages to the ship and her cargo and let alone the environmental aftermath. This means that the insurer may be liable, and the affected party could claim compensation from the shipowner.

From the brief facts at hand, it appears to be a total loss for the shipowner even if the vessel stays afloat with what appears to be, if not all, of the cargo, damaged. Although there is much uncertainty over the size of the loss, it is safe to assume that insurers will face cargo and liability claims and the value of the hull and machinery. The value of these claims have not yet been made known. It is highly possible for the fire and explosion losses to be covered under cargo insurance policies among various companies which are party to it. The London Steam Ship Owners Mutual Insurance Association Ltd and its subsidiary, the London P&I Insurance Company (Europe) Ltd, in a press statement on May 26, 2021, stated that as the “liability insurer, it would cover crew injuries and any environmental impact.” A study of previous cases of similar nature indicates that a vessel sinking in deep water perhaps is a better outcome for the insurer than saving it and bringing it back to port with the heavy cleanup costs incurred. Perhaps in this current scenario, the P&I insurer could end up covering the cargo and salvage costs.

The environmental impact of the fire could have a significant bearing on the size of the P&I claim leading to potentially hundreds of millions, as previous cases have shown us. It is well to keep in mind that while the owners of the ship are maybe accountable for bringing the ship to the territorial waters, the local authorities themselves may have a share in their contribution by their bad choice of actions. It is highly questionable whether adequate compensation could be secured given the larger environmental impact (an impact which may be seen beyond the limitation period for such claims to be brought) under the existing lacuna in the local law. Hence, the importance of the forum state to take on such a mammoth legal action against the parties possibly raises the issues of whether recourse should be made to an international maritime arbitration tribunal permitting contractual arrangements.

The second issue to be addressed is whether a special legal regime in the nature of strict liability is needed to cover the irreparable damage caused to the Sri Lankan Sea, marine lives, including the coral reefs and the fisheries industry. There is now an additional danger that fuel tanks of the stricken vessel containing thousands of tons of thick bunker oil could break up under the pressure of the seawater and discharge its deadly cargo into the ocean. The Wildlife Conservation Department of Sri Lanka states that apart from the fish species, the harm done to seagrasses and nesting habitats, sea mammals, and reptiles will also be substantial and that their “initial observations reveal the spill-over effect will last for more than 100 years.” The illustration of the Exxon Valdez’s incident in 1989 and the Deepwater Horizon accident in the Gulf of Mexico in 2010 indicates that the oil spill is a severe threat to the maritime environment. A review of this incident may be a good reference to seek a fair understanding of the circumstances and for proper estimation and preparation in encountering massive oil spills.

The harm caused by many environmental incidents are not only contained within the borders of the states, but pollution originating from one state may cause harm to another state. And pollution which damages the Oceans does not belong to one state alone. This type of harm raises a number of acute legal conundrums. Establishing causal connections between effects such as damage to marine life or extinction of species and a particular source of pollution, which could be targeted by a system of liability and compensation rules, may be extremely difficult. In the absence of intergovernmental compensation regimes or where individual states seek compensation for cross border pollution, claims must be made in domestic courts. In such situations, the importance of conflict of laws rules about jurisdiction, choice of law, and recognition of judgments matters. One could plausibly conclude that X-Press Pearl too may find its unfortunate place in legal history for the colossal task it has presented of assessing harm to the environment caused in a line of container ship losses in the maritime insurance industry.

(The writer is a Senior Lecturer at the Faculty of Law, Multimedia University. Malaysia and was the Dean of the Faculty of Law from 2014-2016 and 2018-2021.)