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Cyber security – have you exercised due diligence to make your ship seaworthy?

Insights / / London

The recent, and very important, UK Supreme Court decision in Alize 1954 & another v. Allianz Elementar Versicherung & others (CMA CGM Libra) [2021] UKSC 51 has provided a timely and salutory reminder to shipowners and operators of the importance of being able to demonstrate that their ship is seaworthy if they are successfully to defend claims brought against them by cargo interests and others.

The shipowners’ appeal to the Supreme Court in the CMA CGM Libra gave the UK’s highest appellate court the opportunity to consider seaworthiness and owners’ due diligence obligation under the Hague and Hague-Visby Rules in the light of modern technological and industry developments. The maritime industry eagerly anticipated the outcome and, indeed, the International Group of P & I Clubs supported the shipowners’ application to appeal the lower court decisions in favour of cargo interests, influenced no doubt by the reported increase in claims brought against their members alleging vessel unseaworthiness on the grounds of unsafe navigational decisions.

The CMA CGM Libra grounded whilst leaving Xiamen, China, laden with cargo and bound for Hong Kong. Shortly after dropping the pilot, the Master navigated outside the dredged and buoyed fairway resulting in the ship running aground in water where the Admiralty chart indicated ample depth. The owners declared general average and most cargo interests agreed to contribute, but about 8% refused, arguing that they were not liable to contribute in general average because the ship was unseaworthy due to a deficiency in the vessels passage plan which failed to identify that the depths marked on the chart for areas beyond the fairway were unreliable. This unseaworthiness resulted in the grounding and the owners had breached their obligation under Article III, Rule 1 of the Hague/Hague-Visby Rules to exercise due diligence to make the vessel seaworthy before and at the beginning of the voyage.

The Admiralty Judge, a unanimous Court of Appeal and a unanimous Supreme Court all agreed that the vessel was unseaworthy. They concluded that the navigation of the ship was negligent and the ship’s passage plan was defective. The working chart in the passage plan did not specifically refer the navigator to the terms of a Notice to Mariners, issued in 2010, which stated that “numerous depths less than the charted exist within and in the approaches to Xiamen”. Furthermore, the IMO 1999 Guidelines on Passage Planning required berth-to-berth passage planning, including indications on charts of, “all areas of danger” i.e. no-go areasA prudent owner would not have allowed the vessel to depart from Xiamen with a passage plan that was defective because it had not been updated, or because it did not warn of no-go areas. Such defects could render a vessel unseaworthy at the beginning of the voyage. It is however important to note that in this case the Master conceded in cross examination that had the passage plan reflected the warnings he would not have navigated outside the fairway. This went to causation which remains a key factor.

The Supreme Court confirmed that the nautical fault exception in Article IV, Rule 2(a) of the Hague Rules (“Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from…(a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship”) did not relieve the owners from liability where their breach of the due diligence obligation to make the vessel seaworthy caused the grounding. The Article III Rule 1 obligation was overriding and non-delegable and the owners were responsible for the Master and Second Officer’s failure to prepare an adequate passage plan. An owner would not be relieved from liability merely because it had put in place a competent crew and proper systems and instructions, it was also obliged to ensure that the relevant officer prepared an adequate passage plan for the relevant voyage.

The Supreme Court also held that seaworthiness and navigation are not mutually exclusive. Negligent navigation may cause unseaworthiness and, if the act of negligent navigation or management occurred before the commencement of the voyage, the carrier would be liable.

Additionally, the Supreme Court dismissed the argument that it was necessary to identify an attribute of the vessel which threatened the safety of the vessel or her cargo to establish unseaworthiness. Instead, the Court thought that the ‘prudent owner test’ remained the appropriate one in most cases.

The Supreme Court’s decision highlighted some key principles regarding the test of seaworthiness:

  1. A ship is seaworthy if she has the degree of fitness that the ordinary careful owner would require his vessel to have at the commencement of her voyage having regard to all the probable circumstances. In other words: “would a prudent owner have required it should be made good before sending his ship to sea, had he known of it?”
     
  2. A vessel’s seaworthiness extends beyond its physical fitness for the voyage in question. It extends to ensuring that the vessel has: (i) sufficient, efficient and competent crew; and (ii) adequate and sufficient systems on board to address matters that might be encountered during the relevant contractual voyage.
     
  3. Whether a vessel is seaworthy is to be considered by reference to the state of knowledge in the industry at the relevant time. As highlighted by the Admiralty Judge, there was no previous case before the CMA CGM Libra in which it had been held that a defective passage plan rendered a vessel unseaworthy. However, the standard of seaworthiness could rise with improved knowledge of the documents that needed to be prepared prior to a voyage to ensure, so far as reasonably possible, that the vessel was safely navigated. The grounding in this case occurred in May 2011. In view of the fact that the IMO adopted the Guidelines for Voyage Planning in 1999, a prudent owner in 2011 would have insisted on an adequate passage plan from berth to berth.

This is valuable guidance for the maritime industry. However, even before the Supreme Court decision, it was clear that good safety management required a proper plan to be in place if a vessel was to be considered seaworthy. Safety management remains a key component in ensuring and demonstrating that a shipowner, or operator, has exercised due diligence to make his ship both seaworthy and cargo worthy. Undoubtedly in recent years, cyber security has emerged as another risk that has to be managed as part of a ship’s safety management, a risk that was recognised by the IMO and which resulted in the ISM Code for Cyber Security Guidelines (IMO 2021) and the adoption of MSC resolution 428(98).

Given that a vessel’s fitness extends beyond its physical condition of the ship and includes having a properly trained crew able to deal with contingencies arising at sea, cyber risk management should be considered as part of operational risk and both owners and managers ensure this aspect is addressed in order to develop as a natural extension of existing safety and security management practices. The International Ship Management (ISM) Code sets out maritime safety management standards for ship owners and operators that are intended to ensure safety at sea and prevent the loss of life or damage to the environment. Owners must demonstrate that they complied with the ISM Code, provided the vessel with an adequate Safety Management System (SMS) and ensured that it was implemented. Simply having an SMS might no longer be enough to defend an unseaworthiness claim if it is inadequately or incorrectly implemented by the crew.

Furthermore, given that the maritime industry faces increasing cyber security risks that can have a direct impact on ship navigation and cargo handling operations, it is vital that a ship’s SMS incorporates comprehensive and adequate cyber risk management and that this is properly implemented. In addition, although there are as yet no English court decisions on the issue, it is arguably going to become increasingly difficult for shipowners to argue successfully that the state of knowledge in the industry was such that they were not negligent in omitting to address the risk of cyberattack. A failure to include a cyber risk management regime in an SMS could potentially be a breach of the carrier’s due diligence obligation in relation to seaworthiness.

Julian Clark

Julian Clark Global Senior Partner

Reema Shour

Reema Shour Professional Support Lawyer

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