Merchant Shipping (Miscellaneous Amendment) Bill – Speech by Dennis Tan Lip Fong

(Delivered in Parliament on 14 January 2019)

I declare my interest as a shipping lawyer in private practice.

Mr Deputy Speaker sir, this Amendment Bill is a significant bill to the maritime community in Singapore. It involves three major IMO conventions and at least two major areas in maritime law: namely the law on salvage and law on limitation of liability.

This Amendment Bill proposes to bring into force some key maritime conventions of the world: the Salvage Convention and the 1996 Protocol to the Convention on Limitation of Liability to the Maritime Claims (LLMC) 1976. For the rest of my speech, I shall refer to the latter in short as “the 1996 Protocol”.

Mr Deputy Speaker, sir, we have made progress: we have taken about 22 years to adopt the 1996 Protocol. We previously took approximately 29 years to adopt the Convention on Limitation of Liability to the Maritime Claims (LLMC) 1976 (for the rest of my speech I shall refer to this as “the 1976 Convention”). This was in 2005. Prior to that, for many years, Singapore has applied the 1957 Convention relating to the Limitation of Liability of Owners of Seagoing Ships (for the rest of my speech I shall refer to this as “the 1957 Convention”).

I have always wondered why Singapore seem to take a relatively longer time to adopt quite a few of these IMO conventions. The 1976 Convention, the 1996 Protocol and the Salvage Convention of 1989 are cases on point.
When we first adopted the 1976 Convention, I had one reservation and it had to do with the different tests for breaking limitation under the 1957 Convention and 1976 Convention. For the 1957 Convention, the limitation limits are much lower than that of the 1976 Convention but it is relatively easier to break limitation. For the 1976 Convention, it was much, much harder for claimants to break limitation, the requirement for breaking limitation being that the loss must result from a shipowner’s personal act or omission, committed with the intention to cause such loss, or recklessly and with knowledge that such loss would probably result. It has long been acknowledged in the industry that limitation under this requirement is virtually unbreakable. I was personally attracted to the argument that the 1957 Convention would encourage shipowners to strive for a higher standard in return for a lower pay-out by way of the limitation sum.

The differences between the 1976 Convention and the 1996 Protocol are in my view, much less significant than the differences between the 1976 Convention and the 1957 Convention. The test or the requirement for breaking limitation for the 1976 Convention and 1996 Protocol is essentially the same, just that the limits for 1996 Protocol are much higher. That being the case, it should also have been a matter of time before we move from 1976 Convention to the 1996 Protocol.

In my view, at least two events could have persuaded us to accept the 1996 Protocol earlier.
Firstly, the 1996 Protocol came into force in the United Kingdom in 1998. Secondly, the 1996 Protocol came into force in Hong Kong on 3 May 2015.

Even Malaysia adopted the 1996 Protocol before us, in 2014.

Traditionally and for many years now, when it comes to limitation of liability cases such as ship collision claims, shipping lawyers will consider the relative limitation limits as well as any risk or chance of breaking limitation before advising their clients to try and find jurisdiction in countries to set up a limitation fund which may be favourable for them as a matter of limitation limits. Of course there may be other considerations going beyond the limitation limits too.

The fight is for collision and limitation cases to be commenced in Singapore versus our traditional rival states like England and Hong Kong, and to a lesser extent, Malaysia. Commencing jurisdiction in the Admiralty Courts of Singapore also meant the prospects of more cases for our Admiralty Courts and possibly adding to our jurisprudence.

In my view, adopting the Protocol earlier may have provided jurisdictions like England and Hong Kong with one more advantage in a jurisdiction fight between Singapore and these jurisdictions, since the limitation limits under the 1996 Protocol are higher than the 1976 Convention limits as applied in Singapore while the ease of breaking limitation is the same.

And lest anyone think that we will catch up with everyone with today’s amendment, surprise, surprise, we won’t. There is more catching up to do. On 12 April 2012, the Member States to the 1996 Protocol agreed an increase of approximately 51 per cent in tonnage limits in their jurisdictions with effect from 8 June 2015 to reflect the changes of monetary values over the period and to cope with inflation. For the rest of my speech, I shall refer to this in short as “the 2012 Amendment”.

The original 1996 Protocol limits were in force since May 2004 until 8 June 2015 when the new limits came into force under the tacit acceptance procedure set out in the Protocol. The 2012 amendment to the 1996 Protocol increased its limits further as a result of IMO member states’ concern over the insufficiency of the 1996 Protocol limits arising from cases like the “Pacific Adventurer” case in Queensland, Australia in 2009.
Significantly for Singapore, the 2012 Amendment was brought into force in the UK in 2016 and in Hong Kong on 4 December 2017. In my view, this may still put us in some disadvantage relative to the UK and Hong Kong.
I would like to ask the minister:

(1) What were the reasons for deciding on the 1996 Protocol only now

(2) Why are we not adopting the 2012 Amendments instead?

Mr Deputy Speaker, sir, the Salvage Convention which we are adopting today dated back to 1989. It is a relatively dated convention, well known to at least two or more generations of maritime lawyers. I am glad we have decided to adopt the Salvage Convention, given that Singapore is one of the world’s busiest ports and the busy Straits of Singapore and Malacca Straits are in the immediate vicinity, and also given that Singapore is a well-known support base for leading salvors in their operations in the Asia Pacific.

Mr Deputy Speaker, sir, I hope moving forward, Singapore can be a little more robust when supporting IMO conventions. If we seriously consider ourselves as one of the leading maritime countries (as I think we are), unless we object to a particular IMO convention and have spoken up or expressed our apprehensions at IMO level, we should consider taking the lead in adopting new maritime conventions which we are willing to support. And of course, after consultation with industry which can be done even when a convention is being worked out at IMO stage. If we have reasons for taking time, we can always keep the industry posted of our reasons for such delay.

Let me now move on to two aspects of the Salvage Convention.
Mr Deputy Speaker sir, one of the most well-known modern salvage cases or more specifically, one of the most well-known cases involving the Salvage Convention, is a very sad collision case involving the oil tanker, the ‘Nagasaki Spirit’ which was operated from Singapore and the container vessel ‘Ocean Blessing’ in the Malacca Straits in 1992.

Pirates had attacked the ‘Nagasaki Spirit’ and then abandoned her without any crew in the bridge of the vessel causing her to collide with the other ship. The ‘Nagasaki Spirit’ was laden with 40,000 tons of crude oil, of which 12,000 tons escaped into the sea and caught fire, engulfing both vessels. The crew from both vessels perished except for two survivors from the ‘Nagasaki Spirit’.

Professional salvors agreed to salve the ‘Nagasaki Spirit’ under Lloyds Open Form of 1990 (which incorporated Articles 13 and 14 of the Salvage Convention). The salvors managed to put out the fire, salved the remaining cargo, and redelivered the ship to her owners.

The salvage claim went all the way to the English House of Lords in 1996. The House of Lords in the ‘Nagasaki Spirit’ identified problems with the wording of Article 14 of the Convention. Essentially, it was decided that the term ‘fair rate’ in Article 14 for environmental salvage only cover expenditure but does not include an element of profit.

Unhappy with this decision and interpretation of Article 14, salvors and insurers worked together to develop the SCOPIC Codicil in 2000 to overcome the effect of the court ruling. The optional SCOPIC clauses provide special conditions for remuneration to a salvor for efforts to prevent or minimise environmental damage in relation to the salvage of a vessel.

Mr Speaker, sir, following the English House of Lords decision in the ‘Nagasaki Spirit’, if the Salvage Convention is introduced in the present form as in this Amendment Bill, it is likely, if not probable, that at some point, a Singapore court will have to make a decision to decide whether to follow the decision of the House of Lords in the ‘Nagasaki Spirit’ in deciding whether or not that the term ‘fair rate’ in Article 14 for environmental salvage includes an element of profit.

I am saying this because English common law is traditionally of persuasive authority in our Singapore shipping law particularly when Singapore law is silent on the interpretation of any specific issue. The English courts had to deal with this issue back in the late 90s and 20 years down the road, we are introducing this convention in our law and we have this benefit of hindsight to have this addressed in our statutes. We can, for example, have a provision to say that for environmental salvage, fair rate in Article 14 is deemed to include an element of profit.
There is at least one precedent for this. South Africa’s Wreck and Salvage Act 1996 incorporated the Salvage Convention into domestic law. But the Act differs from the Salvage Convention in two important respects, one of whom is that in relation to Article 14 on special compensation, ‘damage to the environment’ is extended to any place where the damage may occur and the ‘fair rate’ as referred to in Article 14 is deemed to include an element of profit. Like South Africa, we can avoid wasting our courts’ time to decide on this point.

Let me move on to my final point. In practice, most high-value salvage services under the Salvage Convention, are performed on a Lloyds Open Form (or in short, LOF, as it is known in the industry) with a written arbitration clause exclusively in favour of London arbitration. With Singapore adopting the Salvage Convention, I hope that our Singapore Chamber for Maritime Arbitration (“SCMA”), with the help of the Singapore Maritime Foundation and the Maritime & Port Authority of Singapore will be knocking on the right doors to change this unhealthy exclusivity of having the world’s salvage cases being decided by arbitration in London and allow the option of Singapore as an alternative for arbitration and governing law on the LOF form.

And there is a good precedent for this too. In 2012, SCMA managed to persuade the Baltic and International Maritime Council (BIMCO), the world largest shipping association and also the world’s leading generator of standard maritime contracts, to include Singapore and SCMA’s arbitration clause as BIMCO’s third standard dispute resolution clause, after London and New York, for world shipping contract form precedents. This is an amazing milestone not just for SCMA but also for Singapore law.

Mr Deputy Speaker, sir, notwithstanding the concerns I have raised, I support the Bill.