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Citation: 25 J. Mar. L. & Com. 1 1994

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journal of Maritime Law and Commerce, Vol. 25, No. 1, January, 1994

Allocation of Risk and Standard of CareUnder the Jones Act: "Slight Negligence,

"Slight Care"?

ROBERT FORCE*

INTRODUCTION

At an October 1992 Maritime Law Seminar for federal district andappellate judges,' the author of this article lectured on the subject of"Maritime Personal Injury and Death Claims." During the presenta-tion, the question that evoked the most lively discussion waswhether, or not, when instructing ajury on Jones Act 2 negligence, thecourt should inform the jury that the plaintiff's burden is only to prove"slight negligence." The issue surfaced when the author stated:

[A]s a general proposition, with a few exceptions, American law doesnot distinguish among "degrees" of negligence.3 Thus, in tort law, for

*Niels F. Johnsen Professor of Maritime Law and Director, Tulane Maritime Law Center.The author wishes to express his appreciation to Stephen K. Carr, Eldon E. Falon, Joshua S.Force and Brian J. Miles for reviewing earlier drafts of this article and for their many helpfulsuggestions. However, the opinions and positions expressed in this article represent the viewsof the author.

IThe 1992 Maritime Law Seminar for Federal Judges (Annapolis, Md., Oct. 28-31),organized and presented by the Federal Judicial Center and the Maritime Law Association ofthe United States, in cooperation with the Association of American Law Schools Section onMaritime Law. The program was arranged by Professor David J. Sharpe of the National LawCenter, George Washington University, as chair of the MLA Ad Hoc Committee on JudicialEducation.

246 U.S.C.A. § 688 (1975). The Jones Act created a cause of action for seamen against theiremployers for injuries sustained in the course of employment. The statute does not expresslyset forth the basis of such liability. It does, however, incorporate the liability rules of theFederal Employers' Liability Act (FELA), 45 U.S.C.A. § 51 (1986), which created an action infavor of railroad workers against their employers. Under the FELA, an employer is liable forany "injury or death resulting in whole or in part from the negligence of any of the officers,agents, or employees of the" employer. Id.31n some states the rules of comparative negligence preclude a plaintiff's recovery if hisnegligence was greater than "slight negligence." W. Keeton, D. Dobbs, R. Keeton, & D.Owen, Prosser and Keeton on the Law of Torts 475 (5th Ed., Hornbook Series, Lawyers Ed.1984) ("Prosser and Keeton). Likewise in some states punitive damages are not recoverableunless the plaintiff can show at least "gross negligence" of the defendant. Id. at 10.

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example, usually it does not matter whether or not. defendant's negli-gence was only "slight" or whether it was "ordinary" or whether itwas "great." It is in this sense that one may say "negligence" is"negligence." All negligence, regardless of the context in which thedoctrine is being applied, is premised on a finding of a breach of a dutyto act as a reasonable person under the circumstances. A finding of abreach of duty is generally insufficient to justify recovery unless it isalso found that the breach of duty contributed to the injury or damagein question. The "standard of care" required in maritime law can bestated generically as being that of a reasonable person under thecircumstances.

Under the Jones Act, however, the courts often characterize theseaman-plaintiff's burden as requiring that he prove only "slightnegligence". 4 It has been said that the seaman's burden of proof in aJones Act case is "featherweight." 5 Although courts do not alwaysarticulate the difference between the standard of care and causation, itis appropriate to speak of "slight negligence" when referring to thequantum of proof plaintiff must adduce to withstand defendant's motionfor a judgment as a matter of law (formerly motion for directed verdictand motion for judgment notwithstanding the verdict). Likewise itseems appropriate to refer to plaintiff's burden of proving causation asbeing "featherweight" because, the Jones Act, as it has been inter-preted by the courts, only requires a seaman to prove that hisemployer's negligence was a cause, sometimes referred to as the"producing cause", and not the cause of his injury' This "feather-weight" standard of causation and the "slight negligence" burden wereadapted from judicial decisions interpreting the FELA6 on which theJones Act was based.

Thus, even in a Jones Act case it is necessary for the seaman-plaintiffto introduce some evidence from which a jury could find that hisemployer's conduct fell below the standard of care that a reasonableemployer would have used under the circumstances. However, theintroduction of virtually any evidence regardless of how slight issufficient to have the jury resolve the issue of negligence. Statedotherwise, the introduction of even the slightest evidence that theemployer's conduct fell below the reasonable person standard pre-

4E.g., Davis v. Hill Engineering, Inc., 549 F.2d 314, 1977 AMC 1090 (5th Cir. 1977);Peterson v. Chesapeake and Ohio Railway Company, 784 F.2d 732, 1987 AMC 769 (6th Cir.1986); Gray v. Texaco, Inc., 610 So.2d 1090 (La. App. 3d Cir. 1993); Mistich v. Pipelines, Inc.,609 So.2d 921 (La. App. 4th Cir. 1992); Collins v. Texaco, Inc., 607 So.2d 760 (La. App. 1st Cir.1992). One of the strongest statements to this effect can be found in Allen v. Seacoast Products,Inc., 623 F.2d 355, 361, 1981 AMC 1341 (5th Cir. 1980), where the court said: "The remedialnature of the Jones Act and its imposition of a higher standard of care on employers results inliability upon the showing of only 'slight negligence.' "

5E.g., Bommarito v. Penrod Drilling Corp., 929 F.2d 186, 188, 1993 AMC 2107 (5th Cir.1991); Landry v. Two R. Drilling Co., 511 F.2d 138, 142, 1975 AMC 2135 (5th Cir. 1975).

Federal Employers' Liability Act, 45 U.S.C.A. HI 51 et seq.

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"Slight Negligence," "Slight Care"?

cludes the trial judge from taking the case away from the jury or fromsetting aside a plaintiff's verdict. 7

These statements evoked comments from some judges that oftenattorneys for plaintiffs request that the jury be instructed that the plaintiffneed only prove "slight negligence" and that Jones Act employers areunder a duty to exercise a "higher duty" to care for the safety of theiremployees than other employers. In keeping with the requested instruc-tion these lawyers want to argue the slight negligence - high dutystandard to the jury. As the discussion developed some judges statedthat they have refused to instruct juries on slight negligence, otherjudges gave such instructions when requested, and some judges indi-cated that they gave the instructions on some occasions but not onothers. Admittedly this group was not assembled as a representativesample of judges, and the opinions they expressed are not offered asreflecting any general practice in trial courts.

Based upon further research it has been concluded in this articlethat the introduction of degrees of negligence with respect to thestandard of care would be confusing to jurors and a misstatement ofthe law. Therefore, juries should not be instructed that a Jones Actplaintiff's burden is only to prove slight negligence or that Jones Actemployers must exercise a higher degree of care than other employ-ers. Instead-juries should be instructed according to the "reasonablecare under the circumstances" standard and according to other rulesestablished under the FELA which are discussed infra. This conclu-sion has been reached by resolving the ambiguities in the use of theterm "slight negligence" in some appellate opinions and by contrast-ing the approach of appellate courts to the standard of care with theirapproach to the sufficiency of evidence and the lesser standard ofcausation in Jones Act cases. However, the article will also show thatthe "duty to provide a safe place to work" and the abolition ofassumption of risk and contributory negligence as complete defensesallocate substantial risks of maritime employment to the employer. Inthe opinion of the author the employer's duty of care can most clearlyand accurately be communicated to jurors by explaining the rules onsafe place to work, assumption of risk, and contributory negligenceand not by introducing the nebulous concept of "slight negligence."

The issue of degrees of negligence and the proper standard of carehas become, perhaps, troublesome in formulating the appropriate

7The statements are contained in 1 R. Force and A. Yiannopoulos, Admiralty and MaritimeLaw: Cases, Notes and Text 472-474 (1992). 1

January 19N

4 Journal of Maritime Law and Commerce2

instruction on contributory negligence. Some courts have held thatthe jury should be instructed that the standard of care that must beexercised by a seaman for his own safety is only slight care and notordinary or reasonable care. The latter part of this article explainshow this approach has developed and concludes that the properinstruction should refer to reasonable or ordinary care under thecircumstances and not slight duty of care.

"SLIGHT NEGLIGENCE": TWO MEANINGS

In concluding that the term "slight negligence" does not refer to thestandard of care, it is important to understand to what the term doesrefer. It is the author's position that the term "slight negligence" is usedby courts in two different contexts. First, it is used as meaning that aplaintiff need only adduce "slight evidence of negligence" to get to thejury or to keep a jury verdict. Second, it is used to clarify the specialcausation rule applicable in Jones Act cases, whereby a plaintiff mayrecover even though the defendant's negligence was only a contributingcause of the plaintiffs injury.8 Commentators who have analyzed theevolution of the FELA and the Jones Act, as those statutes have beeninterpreted by the Supreme Court, have concluded that a plaintiff-employee who brings an action under these statutes has a better chanceof getting his case to a jury and of keeping a jury award compared tothose plaintiffs who bring common law negligence actions9 and that the

8This view is shared by S. Childress and M. Davis, who state in 1 Federal Standards ofReview § 3.07 at 3-68 (1992):

This slight negligence standard, which can be classified as more a rule of lax causationthan a true burden of proof or negligence rule has been translated into a very strictstandard of review on appeal.

See also Miles, The Standard of Care in a Seaman's Personal Injury Action - Has the Jones ActBeen Slighted?, 13 Tul. Mar. L.J. 79 (1988-89) ("Miles").

9One article, critical of some decisions of the Supreme Court, complained that the"Roosevelt packed court" abrogated the established FELA rules which essentially were basedon the common law rules of negligence. The thrust of this criticism was that the "new" Courthad adopted a rule whereby

any plaintiff's case under the FELA must be submitted to the jury and that the jury'sverdict must be binding as to liability, no matter how absent any judicially recognizableprobative evidence that the defendant was negligent and that such negligence was theproximate cause of plaintiff's injury or death, no matter how purely speculative orconjectural that evidence might be, and no matter how clearly and convincingly theevidence might have proved that the injured or deceased employee's own negligence wasthe sole, efficient, the causa causans, of his own injury or death.

Alderman, What the New Supreme Court Has Done to the Old Law of Negligence, 18 L. &Contemp. Prob. 110, 114 (1953). Another author reacted much more favorably to thesedecisions. After characterizing the pre-1939 decisions of the courts as having "battered anddamaged" the FELA, this author stated: "[t]he Supreme Court of the United States, in an

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causation requirement is less demanding than that required in commonlaw tort cases.' 0 It is the position of this article, however, that the term"slight negligence" does not refer to a "degree" of negligence, and thatit is unnecessary either to use or explain this term to the jury. Anappropriate instruction on causation is legally sufficient and correct. Onearticle that has directly addressed the subject of "slight negligence"supports this view," and there has been no suggestion in the literaturethat the standard of care required of an employer is anything less than"ordinary care under the circumstances."' ' 2

impressive series of decisions rendered subsequent to the 1939 amendment, ... has writtenwhat may be accepted as the brightest page in the long struggle of operative railroad men toachieve justice... in securing... adequate compensation for wrongful injury and death."Griffith, The Vindication of a National Public Policy Under the Federal Employers' LiabilityAct, 18 L. & Contemp. Prob. 160, 168 (1953). Yet another author has stated that:

The last decade has witnessed an almost unbroken series of decisions by the United StatesSupreme Court consistently enlarging the role of the jury, in actions under the FELA, indeciding fact issues, particularly relating to negligence and causation. The scope of jurydecision has been so expanded as to make the occasion for a directed verdict rare andexceptional-perilous business for the trial court.

De Parcq, A Decade of Progress Under the Federal Employers' Liability Act, 18 L. &Contemp. Prob. 257, 257 (1953) ("De Parcq").

'0One author has characterized this as "the liberalization of proximate cause." Heconcluded that the Supreme Court was not using the traditional demanding tort standard ofproximate causation, but he was unable to distill the precise standard which was being used.The Court appeared to be basing its use of the less demanding standard on the language of thestatute which makes a carrier liable where "injury or death results in whole or in part" fromcarrier negligence. (Emphasis added). It should be noted, however, that this article was writtenbefore the Supreme Court articulated the standard of FELA causation in Rogers v. MissouriPacific Railroad Co., 352 U.S. 500, 1957 AMC 651 (1957). Rogers is discussed in the text at note21 et seq. infra. De Parcq, supra note 9, 18 L. & Contemp. Prob. at 266.

"Miles, supra note 8. This article, which focuses primarily on cases decided in the FifthCircuit, addresses the substantive issues rather than jury instructions, but in his conclusion theauthor states:

Application of the term "slight" was never intended by Congress or the Supreme Courtto apply to every element of a Jones Act claim. Use of that term to modify the standardof care is especially unwarranted. * * *

The foregoing historical analysis of the "slight duty" and "slight negligence" standardsillustrates the confusion over the standard of care by which actions of both seamen andtheir employers are judged. Although "slight evidence" and "slight causation" may bejustified by the letter and spirit of the Jones Act, deviation from the standard of"reasonable care under the circumstances" is unwarranted and unworkable in thediversified workplace of today's Jones Act seaman.'2Sitzman, A Look at the Federal Employers' Act in the Eighth Circuit, 21 Creighton L.

Rev. 1073, 1081 (1987-88) ("Sitzman"). As stated by Pollack, The Crisis in Work InjuryCompensation On and Off the Railroads, 18 L. & Contemp. Prob. 296, 301 (1953) ("Pollack"):

Some modifications in the meaning of negligence were, of course, inevitable. Viewed as apersonal dereliction of duty, employer negligence would soon have become utterlymeaningless. Obviously, the carrier's duty to its employees had to be re-defined ininstitutional rather than personal terms. Likewise a narrow construction of proximatecause had to be modified as large scale operations made it increasingly difficult to trace and

January 1I94


As will be seen from the cases referred to in this article, the term"slight negligence" or something similar appears most often inappellate court discussions of the standard to be used in determiningwhen a court may properly resolve the Jones Act-FELA negligenceissue itself, either without submitting it to a jury, or in setting aside ajury verdict. "Slight negligence" forms part of a standard that guidesjudicial action in deciding whether or not to grant motions forsummary judgment and motions for judgment as a matter of law. Thestandard also is applied by appellate courts in reviewing rulings oftrial courts on these motions. When used in this context, the termclearly has no relevance to jury instructions. The Supreme Court, indiscussing the perspective of an appellate court in defining theprovince of jury and judge in an FELA case, has said:

These cases, as does the instant case, all involved the question ofwhether there was evidence that any employer negligence caused theharm, or, more precisely, enough to justify a jury's determination thatemployer negligence had played any role in producing the harm. 13

In referring to the appropriate standard for granting a directed verdictagainst a seaman in a Jones Act case it has been stated:

In Jones Act cases the more severe FELA standard was heldappropriate: a directed verdict is possible "only when there is acomplete absence of probative facts"' 14 supporting the nonmovant's

quantify the respective negligence of master and servant with respect to each injury. Also,the doctrine of compensation regardless of fault was bound to have some impact even onpractices under negligence-oriented law. But the carrier's responsibility under the FELAhas always been limited to the exercise of ordinary care and prudence to provide a safeworking place and safe tools and appliances. From the beginning, the Supreme Court hasstressed that the employer is no guarantor of the employee's safety beyond the exerciseof due care and prudence.This view is also expressed in McCoid, The Federal Railroad Safety Acts and the F.E.L.A.:

A Comparison, 17 Ohio St. L.J. 494, 498-99 (1956) ("McCoid"):The FELA predicates liability upon the "negligence" of the carrier, its officers, agents,and employees, which the courts have uniformly taken to mean the common law doctrinesof negligence which would be applied in other types of personal or property injury actions.Variations from the common law doctrine arise from the specific language of the Act itselfin abolishing assumption of risk and the "fellow servant" doctrine as absolute defensesand introducing the concept of "comparative negligence" rather than contributorynegligence into actions brought under the FELA alone.13Gallick v. Baltimore & Ohio R. Co., 372 U.S. 108, 116 (1%3).14This statement is based on the Supreme Court's pronouncement of the proper standard of

appellate review in an FELA case, Lavender v. Kurn, 327 U.S. 645, 653 (1946):It is no answer to say that the jury's verdict involved speculation and conjecture.Whenever facts are in dispute or the evidence is such that fair-minded men may drawdifferent inferences, a measure of speculation and conjecture is required on the part of

Vol. 25, No. I


position.... Boeing [Boeing v. Shipman]15 reasoned that directedverdicts should be disfavored in Jones Act cases because (i) the JonesAct was to be interpreted liberally in the seaman's favor; (ii) theseaman had only to prove "slight negligence," which could beaccomplished by very little evidence; and (iii) adjudication by apresumably seaman-sympathetic jury in Jones Act cases was congres-sionally intended to provide "part of the remedy."' 6 ... Boeing

those whose duty it is to settle the dispute by choosing what seems to them to be the mostreasonable inference. Only when there is a complete absence of probative facts to supportthe conclusion reached does a reversible error appear. But where, as here, there is anevidentiary basis for the jury's verdict, the jury is free to discard or disbelieve whateverfacts are inconsistent with its conclusion. And the appellate court's function is exhaustedwhen that evidentiary basis becomes apparent, it being immaterial that the court mightdraw a contrary inference or feel that another conclusion is more reasonable.15411 F.2d 365 (5th Cir. 1969) (en banc).161n Rogers, supra note 10, 352 U.S. at 505-06, 510, the Supreme Court explained the jury's

role in applying the statutory standard of liability of the FELA:The opinion [of the Missouri Supreme Court] may also be read as basing the reversal [ofthe jury verdict for plaintiff] on another ground, namely, that it appeared to the court thatthe petitioner's conduct was at least as probable a cause for his mishap as any negligenceof the respondent, and that in such case there was no case for the jury. But that wouldmean that there is no jury question in actions under this statute, although the employee'sproofs support with reason a verdict in his favor, unless the judge can say that the jurymay exclude the idea that his injury was due to causes with which the defendant was notconnected, or, stated another way, unless his proofs are so strong that the jury, ongrounds of probability, may exclude a conclusion favorable to the defendant. That is notthe governing principle defining the proof which requires a submission to the jury inthese cases. The Missouri court's opinion implies its view that this is the governingstandard by saying that the proofs must show that "the injury would not have occurredbut for the negligence" of his employer, and that "[t]he test of whether there is causalconnection is that, absent the negligent act the injury would not have occurred." Thatis language of proximate causation which makes a jury question dependent upon whetherthe jury may find that the defendant's negligence was the sole, efficient, producing causeof injury.

The kind of misconception evidenced in the opinion below, which fails to take into accountthe special features of this statutory negligence action that make it significantly differentfrom the ordinary common-law negligence action, has required this Court to review anumber of cases. In a relatively large percentage of the cases reviewed, the Court hasfound that lower courts have not given proper scope to this integral part of thecongressional scheme. We reach the same conclusion in this case. The decisions of thisCourt after the 1939 amendments teach that the Congress vested the power of decision inthese actions exclusively in the jury in all but the infrequent cases where fair-mindedjurors cannot honestly differ whether fault of the employer played any part in theemployee's injury. Special and important reasons for the grant of certiorari in these casesare certainly present when lower federal and state courts persistently deprive litigants oftheir right to a jury determination.In Johannessen v. Gulf Trading & Transportation Company, 633 F.2d 653, 656, 1981

AMC 18 (2d Cir. 1980), the court stated: "It is well established that the role of the jury issignificantly greater in Jones Act and FELA cases than in common law negligence actions.The right of the jury to pass upon the question of fault and causation must be most liberallyviewed."

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therefore endorsed a long line of cases applying the FELA standard toJones Act claims.' 7

Consider the following sentence extracted from the opinion of theFifth Circuit in In re CooperiT. Smith:

Under the Jones Act, a defendant must bear the responsibility for anynegligence, however slight, that played a part in producing the plain-tiff's injury.' 8

One could find that the language of the sentence is ambiguous. Oneof the reasons for this ambiguity is that sometimes courts use theword negligence merely as reference to the defendant's conductmeasured against legal duty and standard of care. At other times theterm is used as embracing all of the elements of a negligence action:duty to act carefully, conduct that falls below that standard of care,and a causal relationship between that breach of duty and theplaintiff's injury. If the word negligence is used in the first sense, then"slight negligence" could only relate to the standard of care whichwould require that the defendant act in a very careful manner, that is,in a manner more careful than would ordinarily be required in thecircumstances. If the word negligence is used in the latter sense, then

17Allen, supra note 4, 623 F.2d at 360 (citations omitted). More recently the Fifth Circuit inBommarito, supra note 5, 929 F.2d at 188, has said:

As this Court has held in countless cases presenting the Jones Act "featherweight"burden, directed verdict is justified "[o]nly when there is a complete absence of probativefacts to support the verdict." Thornton v. Gutf Fleet Marine Corp., 752 F.2d 1074, 1076(5th Cir. 1985) (quoting Lavender v. Kurn, 327 U.S. 645, 652, 66 S. Ct. 740, 743, 90 L.Ed.916, 922 (1946)); see also Comeaux v. T.L. James & Co., 702 F.2d 1023, 1024, 1984 AMC2805, 2806 (5th Cir. 1983), modifying 666 F.2d 294 (5th Cir. 1982); Alvarez v. J. RayMcDermott & Co., 674 F.2d 1037, 1042, 1984 AMC 302 (5th Cir. 1982). The jury's verdictmust be allowed to stand unless the plaintiff failed to put forth at least a marginal claim forrelief. See id.; Holmes v. J. Ray McDermott & Co., 734 F.2d 1110, 1120, 1985 AMC 2024,2037 (5th Cir. 1984); Leonard v. Exxon Corp., 581 F.2d 522, 524 (5th Cir.), cert. denied,441 U.S. 923, 99 S. Ct. 2032, 60 L.Ed.2d 397 (1979).Clobber v. Bung Towing, Inc., 883 F.2d 372, 375, 1990 AMC 879, 882 (5th Cir. 1989) (only

slight evidence of negligence is required to uphold ajury verdict for the seaman-plaintiff); Milesv. Melrose, 882 F.2d 976, 983, 1990 AMC 57, 65 (5th Cir. 1989) ("The standard of review for thesufficiency of the evidence to establish claims arising under the Jones Act is less exacting thanthat for general maritime law claims. The evidence suffices unless there is a 'complete absenceof probative facts' to support the non-movant's position.").

Likewise in Danghenbaugh v. Bethlehem Steel Corp., Great Lakes Steamship Div., 891 F.2d1199, 1205, 1990 AMC 2049, 2059 (6th Cir. 1989), the court stated:

[fIn light of the "policy of providing an expansive remedy for seamen, submission of JonesAct claims to a jury requires a very low evidentiary threshold; even marginal claims areproperly left for jury determination." Quoting Leonard v. Exxon Corp., 581 F.2d 522, 524(6th Cir. 1978), cert. denied, 441 U.S. 923 (1979).18929 F.2d 1073, 1076-77, 1991 AMC 2169, 2173 (5th Cir. 1991).

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it is not clear whether "slight negligence" refers to the duty-standardof care elements, or the causation element, or to all elements.19

Examining the statement in a vacuum, it could reasonably beinterpreted as meaning that negligence exists in varying degrees andthat the plaintiff in a Jones Act case need only show that thedefendant's conduct was negligence of the lowest degree. In thissense the word "slight" refers back to the word "negligence" whichprecedes it. As such it modifies the quality of negligence. It sayssomething about the standard of care, or stated otherwise, it quanti-fies the degree of carelessness necessary to support recovery by theplaintiff. This interpretation could support a contention that there is adifference between "slight negligence" and "ordinary negligence." 20

19See discussion at note 26 infra.20rhe reference to the term "slight negligence" in Allen, supra at note 17, is part of a

quotation from Boeing, supra note 15, 411 F.2d at 370-71. Boeing was a diversity action basedon state tort and workers' compensation law. The issue in the case involved the standard to beapplied by a court in passing on the sufficiency of the evidence to create a jury question, thatis, when is it appropriate for a trial court to take a case away from the jury. More specifically,the question was whether or not the standard articulated by the Supreme Court in FELA andJones Act cases should be applied. The FELA rule is very favorable to the plaintiff-employeeand gives the plaintiff the right to have his case resolved by a jury if there is any evidence tosupport it. The court of appeals in Boeing held that the FELA standard should not be used andinstead that the usual standard should be applied. As part of its analysis, the court noted thatCongress in enacting the FELA and providing for jury trials had provided a remedy for injuredrailroad workers and seamen which required less strenuous proof of negligence than isotherwise required. The Boeing court quoted extensively from Rogers, supra note 10, theseminal case articulating the negligence and causation standards under the FELA.

The Supreme Court further said in Rogers (citation omitted): "Under this statute (FELA)the test of a jury case is simply whether the proofs justify with reason the conclusion thatemployer negligence played any part, even the slightest, in producing the injury or death forwhich damages are sought."

Note that the Rogers Court did not use the term "slight negligence." It used the termslightest" in referring to causation. Yet it was in this context that the Boeing court (not theRogers Court) then said:

Slight negligence, necessary to support an FELA action, is defined as 'a failure to exercise greatcare,' and that burden of proof, obviously, is much less than the burden required to sustainrecovery in ordinary negligence actions. Prosser, Law of Torts § 34, at 186 (3d ed. 1964).

Note, however, that this gratuitous definition was immediately followed by this statement:Beyond the fact that a statutory action under the FELA significantly differs from acommon law negligence action in terms of the standard of proof, it is clear that thecongressional intent in enacting the FELA was to secure jury determinations in a largerproportion of cases than would be true of ordinary common law actions. In other words,"trial by jury is part of the remedy" in FELA cases.Except for the brief reference to the Prosser definition of "slight negligence," the entire

discussion by the Boeing court focused on the issue of when a court could take a case awayfrom ajury or set aside ajury verdict. The case did not address the subject ofjury instructions.The reference to slight negligence as being a "failure to exercise great care" is not part of theholding of the case. Furthermore, that reference to Prosser is misleading because the currenttext of Prosser and Keeton generally rejects "degrees of negligence"

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Under this interpretation of "slight negligence" the term "negli-gence" must refer to the application of the standard of care to thedefendant's conduct.

On the other hand, the word "slight" in the sentence quoted abovetakes on a quite different meaning when considered in its historicalcontext and when read together with the sentences which precedeand follow it. The seminal case defining FELA negligence is Rogersv. Missouri Pacific Railroad Co. 21 Rogers appears to have been thefirst case in which the term "slight" was used in defining the basis foran employee's claim under the FELA.22 There the Supreme Courtsaid:

Under this statute the test of a jury case is simply whether the proofsjustify with reason the conclusion that employer negligence played anypart, even the slightest, in producing the injury or death for whichdamages are sought. It does not matter that, from the evidence, the jurymay also with reason, on grounds of probability, attribute the result toother causes, including the employee's contributory negligence. Judi-cial appraisal of the proofs to determine whether a jury question is

..presented is narrowly limited to the single inquiry whether, withreason, the conclusion may be drawn that negligence of the employerplayed any part at all in the injury or death.23

as a distinction that is "vague and impracticable in [its] nature, so unfounded inprinciple," that it adds only difficulty and confusion to the already nebulous and uncertainstandards which must be given to the jury. The prevailing rule in most situations is thatthere are no "degrees" of care or negligence, as a matter of law; there are only differentamounts of care, as a matter of fact. Prosser and Keeton, supra note 3, at 210-11.Furthermore, with respect to FELA actions Prosser and Keeton state that the interpretation

of the Act by the courts:has been said to reduce the extent of the negligence required, as well as the quantum ofproof necessary to establish it, to the "vanishing point." While it is still undoubtedly truethat there must be some shreds of proof both of negligence and causation .... thereappears to be little doubt that under the statute jury verdicts for the plaintiff can besustained upon evidence which would not be sufficient in the ordinary negligence action.Prosser and Keeton, id. at 579. (Emphasis added).Thus, the Boeing decision when read in the context described above supports the view that

if there is any evidence that an employer's negligence contributed to the plaintifs injury, a trialcourt must allow the case to go to the jury and if the jury finds employer negligence andcausation, those findings must stand.

21352 U.S. 500 (1957).2Cf. Atlantic Coast Line R. Co. v. Burkett, 192 F.2d 941 (5th Cit. 1951); Newsum v.

Pennsylvania R. Co., 97 F. Supp. 500 (S.D.N.Y. 1951); Walton v. Continental S.S. Co., 66 F.Supp. 836 (D. Md. 1946).

23352 U. S. 506-08 (1957) (emphasis added). This standard of liability is applicable in JonesAct cases. Ferguson v. Moore-McCormack Lines, Inc., 352 U.S. 521 (1957).

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The law [FELA] was enacted because the Congress was dissatisfiedwith the common-law duty of the master to his servant. The statutesupplants that duty with the far more drastic duty of paying damages forinjury or death at work due in whole or in part to the employer'snegligence. The employer is stripped of his common-law defenses andfor practical purposes the inquiry in these cases today rarely presentsmore than the single question whether negligence of the employerplayed any part, however small, in the injury or death which is thesubject of the suit. The burden of the employee is met, and theobligation of the employer to pay damages arises, when there is proof,even though entirely circumstantial, from which the jury may withreason make that inference.24

The Court in Rogers clearly created a minimal standard for thesufficiency of evidence needed to get a plaintiff's case to the jury andfor keeping a jury award of damages. The Court formulated thisstandard clearly in the context of articulating the "appropriate" ruleof causation applicable in FELA cases. The rule announced by theCourt requires only that employer negligence play "any part, eventhe slightest," in causing the plaintiff's injury. If the plaintiff's proofsatisfies this light burden of proof of causation, the plaintiff not onlygets to the jury but also keeps a favorable verdict.

Also consider in a fuller context the "ambiguous" sentence quotedearlier:

The burden to prove causation in a Jones Act case is "very light" or"featherweight." Under the Jones Act, a defendant must bear theresponsibility for any negligence, however slight, that played a part inproducing the plaintiffs injury. Although in Jones Act cases a "jury isentitled to make permissible inferences from unexplained events,"summary judgment is nevertheless warranted when there is a completeabsence of proof of an essential element of the nonmoving party'scase. 25

Placing the statement in this fuller context reveals several things.First, as mentioned previously, the term "slight negligence" wasreferred to here by the appellate court as part of its review of theappropriateness of the trial court's grant of summary judgmentagainst a Jones Act claim. The court did not review the correctness ofjury instructions nor did it purport to prescribe appropriate juryinstructions as to Jones Act negligence. Second, note that thereference to "slight negligence" follows the statement that "the

24Rogers, supra note 10, 352 U.S. at 508.

25CooperT. Smith, supra note 18, 929 F.2d at 1076-77 (citations omitted, emphasis added).

January I004


burden to prove causation is very light. . .". In defining the appro-priate rule of causation, the court states that "any negligence,however slight, that played a part in producing plaintiff's injury" issufficient. This contextual reading should make it apparent that thereference to "slight negligence" means that a seaman's employermay still be held liable if the employer's conduct fell below thestandard of reasonable care even though this negligence was only aminor factor in bringing about the injury. The fact that other causes,including the plaintiff's own negligence, may have contributed to theinjury does not defeat a plaintiff's right to recover damages. In otherwords the term "negligence" refers to the causation element ofnegligence and not to the standard of care or defendant's conduct.This interpretation of the Fifth Circuit's statement in In re Cooper/T.Smith is consistent with the Supreme Court's holding and analysis inRogers. The ambiguity could be avoided, perhaps, if courts usedlanguage more nearly approximating Rogers and by placing qualifyingterms such as "slight" after the reference to causation as suggestedin the various Pattern or Model Jury Instructions, discussed infra.

Another example of how context may be critical to interpretation isillustrated in Gosnell v. Sea-Land Service, Inc.26 There the courtsaid:

Jones Act negligence and unseaworthiness are two separate anddistinct claims, . . ., requiring two different standards of proof forcausation. The Jones Act, which adopted by reference the lax negli-gence standard of the Federal Employers' Liability Act, requires onlythat the defendant's negligence contribute in any way, however slight,in causing plaintiff's injuries.... On the other hand, in order to provea claim of unseaworthiness, a plaintiff must show that the unseaworthycondition of the vessel was the proximate or direct and substantialcause of the seaman's injuries.

The trial court correctly instructed the jury on the elements of JonesAct negligence and unseaworthiness, including the different standardsfor causation. (Citations omitted, emphasis added).

Note that the first use of the word "negligence" (contrasting negli-gence and unseaworthiness claims) seems to suggest that the court isreferring to all of the components of a negligence claim including thecausal element linking the defendant's conduct to the plaintiff'sinjury. The second use of the term "negligence," that is, "laxnegligence," is less clear, but the subsequent reference to causation

26782 F.2d 464, 467 (4th Cir. 1986). See note 19 supra.

Vol. 25, No. I


would indicate that the court is including causation as an element ofnegligence. But the third use of the word negligence seems to referonly to the defendant's conduct and not to causation because thecourt is saying that the jury must determine if the defendant's conduct(negligence) caused the plaintiff's injury. By reading the words "laxnegligence" in context, it seems quite clear that the court means thatthe causation element of Jones Act "negligence" may be satisfied bya standard of proof that is more "lax" than the standard applied inunseaworthiness claims.

Likewise, it has been stated that:

The "producing cause" FELA standard, used for Jones Act negli-gence, facilitates proof by the employee, incorporating any causeregardless of immediacy. Plaintiff's burden of proving such cause is"featherweight," and all that is required is a showing of "slightnegligence." In keeping with this less demanding standard of proof ofcausation, the test for sufficiency of evidence in a Jones Act case alsorequires less evidence to support a finding and directed verdicts andj.n.o.v. motions are granted "only when there is a complete absence ofprobative facts" to support a verdict. 27

Again the reference to "slight negligence" read in context seems tobe nothing more than a verbal short cut for referring to the "lessdemanding standard of proof" required for the causation element ofJones Act negligence.

There does not appear to be a case in which an appellate court hasheld that a trial court when instructing the jury on employer's JonesAct negligence should explain the difference between "slight" and"ordinary" negligence and that a court commits error if it fails to doso. Likewise there does not appear to be a case in which a trial courthas been reversed for instructing the jury as to employer negligencein terms of "ordinary" rather than "slight" negligence. Finally,there does not appear to be an appellate decision indicating thatjuries should be told that in Jones Act cases an employer is under ahigher duty of care than would ordinarily be required. 28 In most of

27Comeaux v. T.L. James & Co., 702 F.2d 1023, 1024, 1984 AMC 2805 (5th Cir. 1983)

(citations omitted); Springborn v. American Commercial Barge Lines, Inc., 767 F.2d 89, 99 (5thCir. 1985).

28Occasionally appellate courts have referred to the "higher" standard of care imposed onemployers in Jones Act cases, but these cases do not even suggest that juries should beinstructed in terms of "slight negligence." See, e.g., Allen v. Seacoast Products, Inc., 623 F.2d355, 361 (5th Cir. 1980); Interocean S.S. Co. v. Topolofsky, 165 F.2d 783, 784, 1949 AMC 198(6th Cir. 1948); Springborn, supra note 27, 767 F.2d at 99; Dempsey v. MAC Towing, Inc., 876F.2d 1538, 1542 (1lth Cir. 1989). Also S. Childress and M. Davis in 1 Federal Standards of

January 1994


the cases cited herein, the courts have simply referred to thestandard of care as being that of reasonable care under the circum-stances. The Court of Appeals for the Fifth Circuit specifically hasheld that a trial court did not commit error in refusing the plaintiff'srequest that the jury be instructed that it need find only "slightnegligence" to establish liability. 29 In one of the leading works on

Review § 3.07 at 3-72 (1992) assume that juries are routinely instructed on "slight negligence,"but this assumption is not central to the authors' concern with the proper standard of appellatereview. On the other hand some courts have specifically referred to the standard as being thatof "ordinary care." E.g., Kokesh v. American Steamship Company, 747 F.2d 1092, 1094, 1985AMC 2808, 2810 (6th Cir. 1984).

"'Rogers v. Eagle Offshore Drilling Services, Inc., 764 F.2d 300, 304-05 (5th Cir. 1985). Onappeal the plaintiff contended that "while the district court properly instructed the jury underthe Jones Act that all that is needed is slight causation, it also should have used the term'slight,' rather than 'any' negligence when explaining the degree of negligence necessary toestablish liability." The Fifth Circuit then reviewed the instructions given by the districtcourt:

The district court instructed the jury that: "For purposes of this action, negligence is alegal cause of damage if it played any part, no matter how small, in bringing about oractually causing the injury or damage. So if you should find from the evidence in the casethat any negligence of the defendant contributed in any way toward any injury or damagessuffered by the plaintiff, you may find that such injury or damage was legally caused by thedefendant's act or omission."... Later, while instructing the jury on the unseaworthinessclaim, the district court also stated: "Unlike the Jones Act claim, with respect to which theplaintiff may recover if the alleged negligence is proved to be a slight cause of the injurysustained, in order to recover on a claim of unseaworthiness it must be proved that theunseaworthy condition was a substantial cause of the injury." * * * A review of thedistrict court's charge to the jury indicates that the district court adequately explained tothe jury the lesser standard of negligence needed to establish liability under a Jones Actclaim. The lesser standard of care was not only explained to the jury in instructionsregarding the Jones Act claim, but it also was emphasized when instructions were givenon the unseaworthiness claim.Likewise in Robin v. Watson Brothers Drilling, 719 F.2d %, 97 n.l (5th Cir. 1983), the

plaintiff complained that the trial court failed to instruct the jury that the "employer must showa higher degree of care for work aboard a vessel than on land." The Court of Appeals held thatthe following jury instruction was proper:

For purposes of this action, of this [Jones Act] claim, negligence is a legal cause of damageif it played any part, no matter how small, in bringing about or actually causing the injuryor damage. So, if you should find from the evidence in the case that any negligence of thedefendant. . . , contributed in any way toward the injury or damages suffered by theplaintiff, you may find that such injury or damage was legally caused by defendant's]...act or omission.

Unlike the Jones Act claim, with respect to which plaintiff may recover if the allegednegligence is proved to be a slight cause of the injury sustained, in order to recover on aclaim of unseaworthiness it must be proved that the unseaworthy condition was asubstantial cause of the injury complained of.The instructions in both Rogers v. Eagle Offshore Drilling Services, Inc. and Robin v.

Watson Brothers Drilling, supra, basically followed the Pattern Jury Instructions for DistrictJudges in the Fifth Circuit, which are discussed infra.

Vol. 25, No. I


maritime personal injury, Jones Act negligence is simply defined as:"The seaman must prove the existence of a duty, the negligentviolation of this duty by the employer, and, finally, a causalrelationship of the violation to the injury sustained." 30 No referenceto or discussion of "slight negligence" appears in the treatise. Thatthe term "slight" involves the relationship between the standard ofcare and causation was illustrated by the Eleventh Circuit inDempsey v. MAC Towing, Inc.31

* In light of these general principles, the courts have allowed a seaman torecover on a Jones Act claim with a lower showing of proximate causethan would be required in a non-admiralty case. See id. at 222-23(comparing proximate cause requirements in admiralty and non-admi-ralty cases); see also Sanford Bros. Boats, Inc. v. Vidrine, 412 F.2d958, 962 (5th Cir. 1969) (in Jones Act case, sufficient evidence exists tosupport jury verdict on issue of causation if employer negligence playedeven slightest part in producing injury); accord McClow v. Warrior &Gulf Navigation Co., 842 F.2d 1250, 1251 (11th Cir. 1988).

The Second Circuit also has indicated that the term "slight"implicates the relationship between the defendant's conduct and theplaintiff's injury. It has stated that:

Under the Jones Act, a "plaintiff is entitled to go to the jury if 'theproofs justify with reason the conclusion that employer negligenceplayed any part, even the slightest, in producing the injury . . . forwhich damages are sought."'32

MODEL OR PATTERN JURY INSTRUCTIONS

Further support for the views expressed in this article may befound in the Model or Pattern Jury Instructions which have been

The following instruction was upheld in Ardoin v. J. Ray McDermott & Co., 684 F.2d 335,337 (5th Cir. 1982):

For purposes of this action, negligence is a "legal cause" of damage if it played any part,no matter how small, in bringing about or actually causing the injury or damage. So, if youshould find from a preponderance of the evidence in this case that any negligence of thedefendant contributed in any way toward any injury or damages suffered by the plaintiff,you may find that the injury or damage was legally caused by the defendant's act oromission. Negligence may be a legal cause of damage even though it operates incombination with the act of another, some natural cause, or some other cause if the othercause occurs at the same time as the negligence and if the negligence played any part, nomatter how small, in causing such damage.3M. Norris, 2 The Law of Seamen 30-34, at 460 (4th ed. 1985). Fraser v. U.S., 167 F.2d

141, 143, 1948 AMC 636 (1st Cir. 1948) (reasonably prudent man standard).31Supra note 28, 876 F.2d at 1542-43.32Oxley v. City of New York, 923 F.2d 22, 25, 1991 AMC 1816 (2d Cir. 1991).

January 1994


prepared for use by District Judges in the various circuits. 33 Forexample, in the Ninth Circuit the suggested instruction on Jones Actnegligence34 is as follows:

9.01.01 JONES ACT-NEGLIGENCE CLAIMS-ELEMENTS ANDBURDEN OF PROOF-AFFIRMATIVE DEFENSE

[On the plaintiff's claim,] the plaintiff has the burden ofproving each of the following by a preponderance of the evidence:

1. the defendant was negligent, and2. the defendant's negligence was a [proximate] [legal] cause of aninjury to the plaintiff.

If the plaintiff has failed to prove each of these things, your verdictshould be for the defendant. If, on the other hand, you find that each ofthe things on which the plaintiff has the burden of proof has beenproved, your verdict should be for the plaintiff.

9.01.02 JONES ACT-NEGLIGENCE DEFINED

Negligence is the failure to use reasonable care. Reasonable care is thedegree of care that reasonably prudent persons would use under likecircumstances to avoid injury to themselves or to others. Negligence isthe doing of something that a reasonably prudent person would not do,or the failure to do something that a reasonably prudent person woulddo, under like circumstances.

The instruction 35 suggested for District Judges in the Fifth Circuitprovides:

33The Pattern or Model Jury Instructions referred to in this article have been prepared bycommittees in the various circuits whose members include District Judges of the respectivecircuits. The various instructions have been published as separate pamphlets by WestPublishing Co. and may include a caveat such as the following one contained in the Pattern JuryInstructions - Civil Cases from the Fifth Circuit:

This work contains general civil jury instructions and special instructions for the mostfrequently recurring federal question cases. These instructions are illustrative only.Theyattempt to present the applicable law in language that is precise, clear, and brief. Judgesare encouraged to modify the instructions or the order in which they are presented to thejury in any manner that will further these goals.

Although these instructions do not have the force of law, they do appear to represent the viewsof the judges who prepared and approved them as to what they believe the law to be.

34Manual of Model Civil Jury Instructions for the Ninth Circuit (1993).35Pattern Jury Instructions (Civil Cases) 4.4 and 4.6 (U.S. Fifth Circuit District Judges

Association, 1992 Edition).

Vol. 25, No. I

'Slight Negligence," "Slight Care"?

4.4JONES ACT-NEGLIGENCE

Under the Jones Act, plaintiff _ must prove that his employerwas negligent. Negligence is the doing of an act that a reasonablyprudent person would not do, or the failure to do something that areasonably prudent person would do under the same or similar circum-stances. The occurrence of an accident, standing alone, does not meananyone's negligence caused the accident.

In a Jones Act claim the word "negligence" is given a liberal interpre-tation. It includes any breach of duty that an employer owes to hisemployees who are seamen, including the duty of providing for thesafety of the crew.

Under the Jones Act, if the employer's negligent act or omission playedany part, no matter how small, in actually causing the plaintiff's injury,then you must find that the employer is liable under the Jones Act. 36

4.6CAUSATION

Not every injury that follows an accident necessarily results from it.The accident must be the cause of the injury.

In determining causation, different rules apply to the Jones Act claimand to the unseaworthiness claim.

Under the Jones Act, an injury or damage is considered caused by anact, or failure to act, if the act or omission played any part, no matterhow small, in bringing about or actually causing the injury or damage.

In an unseaworthiness claim, the plaintiff must show, not merely thatthe unseaworthy condition was a cause of the injury but that suchcondition was a proximate cause of it. This means that the plaintiff mustshow that the act or omission played a substantial part [was asubstantial factor] in bringing about or actually causing his injury, andthat the injury was either a direct result or a reasonably probableconsequence of the act of omission. 37

36Instructions in the form of these Pattern Jury Instructions have been upheld by the FifthCircuit. See cases cited in note 22, supra.

37Thus, a jury finding of causation on the negligence claim and of no causation on theunseaworthiness claim may be sustained. Landry v. Oceanic Contractor, Inc., 731 F.2d 299,1986 AMC 865 (5th Cir. 1984).

January 1994


Pattern Jury Instruction 5.1 for District Judges in the Eleventh Circuit,which deals with Jones Act and Unseaworthiness claims states:38

"Negligence" is the failure to use reasonable care under the circum-stances. Reasonable care is that degree of care which a reasonablycareful person would use under like circumstances. Negligence mayconsist either in doing something that a reasonably prudent personwould not do under like circumstances, or in failing to do somethingthat a reasonably careful person would do under like circumstances.

For purposes of this action, negligence is a "legal cause" of damage ifit played any part, no matter how small, in bringing about or actuallycausing the injury or damage. So, if you should find from the evidencein the case that any negligence of the Defendant contributed in an waytoward any injury or damage suffered by the Plaintiff, you may find thatsuch injury or damage was legally caused by the Defendant's act oromission. Negligence may be a legal cause of damage even though itoperates in combination with the act of another, some natural cause, orsome other cause if such cause occurs at the same time as thenegligence and if the negligence played any part, no matter how small,in causing the damage.

It should be noted that none of the jury instructions prepared andsuggested for use by district courts within the respective circuitsdefines or even uses the term "slight negligence." Nothing appears inany of the instructions which requires the jury to be told that thedefendant is under a duty to exercise more than reasonable care orthat the defendant must exercise a higher degree of care than wouldbe exercised by a reasonably careful person under the circumstances.The word "slight" does not appear at all in any of the instructions.The Fifth and Eleventh Circuits' instructions do use the phrase "nomatter how small." But that phrase clearly refers to the relationshipthat negligence bears to the plaintiff's injury.

A leading text containing suggested jury instructions takes a similarapproach. It recommends the following with respect to Jones Actnegligence: 39

§ 95.06 "Negligence"-Defined

8Pattern Jury Instructions 5.1 Civil Cases (U.S. Eleventh Circuit District Judges Associa-tion, 1990 Edition).

39E. Devitt, C. Blackmar & M. Wolff, 3 Federal Jury Practice and Instruction 635-36, 638(4th ed. 1987).

Vol. 25, No. I


"Negligence" is the failure to use reasonable care. Reasonable care isthat degree of care which a reasonably careful person would use underlike circumstances. Negligence may consist either in doing somethingthat a reasonably careful person would not do under like circum-stances, or in failing to do something that a reasonably careful personwould do under like circumstances.

§ 95.09 Cause-Jones Act

For purposes of plaintiff's Jones Act claim, negligence is a cause ofdamage if it played any part, no matter how small, in bringing about theactual damage. So, if you find from the evidence in the case that anynegligence of the defendant contributed in any way toward any dam-ages or injury suffered by the plaintiff, you may find that such injury ordamage was caused by the defendant's act or omission. Negligencemay be a cause of damage even though it operates in combination withthe act of another, some natural cause, or some other cause if suchother cause occurs at the same time as the negligence and if thedefendant's negligence played any part, no matter how small, incausing such damage.

STANDARD OF CARE-SPECIAL RULES

To state that the proper jury instruction on the standard of care ina Jones Act case should be phrased only in terms of "reasonable careunder the circumstances" and not in terms of "slight negligence" isnot a completely accurate or comprehensive statement of the stan-dard of care. In order to fully understand the appropriate standard,other rules established under the FELA-Jones Act must be consid-ered, principally those that deal with the duty of an employer toexercise reasonable care to provide its employees with a safe place towork and the abolition of assumption of risk and contributorynegligence as complete defenses.

Every type of employment presents some risks to employees.These risks may be inherent in the work site or the nature of thework. Risks may stem from the necessity to use equipment or tools.Risks may exist because of the need to work with others. How thelaw distributes those risks between an employer and its employees isan important factor in defining the "reasonableness" aspect of thestandard of care imposed on an employer and in determining whetheran employer's conduct fell below the standard of reasonable care itowed to its employees, that is, whether or not the employer wasnegligent. When an employee is injured because of some hazard ofthe work place and sues to recover damages under the Jones Act, itmust be determined who had the responsibility for eliminating or

199n I4


minimizing that particular hazard. Did the employer have the duty tomake the work place safe for its employees or did the employees havethe duty to make their work place safe or, at least, to avoid thehazard? Recovery in a negligence action requires proof of a breach ofduty. If the law imposes the duty to make the work place safe on theemployer, in a sense, it imposes a higher or greater duty on theemployer than if it imposed that duty on the employees. Theallocation of that duty to the employer helps define the employer'sduty of care to its employees.

In a similar vein, to what extent can it be said that employeesassume the risks of their employment? It might be suggested thatalthough the work of seamen is dangerous, that fact is known to themand they are paid in part to endure those hazards. But the law mightadopt the view that seamen should not be penalized by imposing thefull burden of employment risks on them simply because they haveagreed to do work that exposes them to hazards. As indicated above,recovery in a negligence action requires proof of a breach of duty. Ifthe law does not impose risks of employment on the employees, thenthe duty to take reasonable steps to eliminate or minimize those risksof which the employer is or should be aware may be imposed by thelaw on the employer. The allocation of these risks to the employer notonly deprives the employer of a defense but also helps define theemployer's duty of care to its employees.

1. The Employer's Duty to Provide a Safe Place to Work

The Supreme Court, in FELA cases, has stated that "the employ-er's liability is to be determined under the general rule which definesnegligence as the lack of due care under the circumstances; or thefailure to do what a reasonable and prudent man would ordinarilyhave done under the circumstances of the situation; or doing whatsuch a person under the existing circumstances would not havedone." 40 The Supreme Court has also recognized that "[a]t commonlaw the duty of the employer to use reasonable care in furnishing hisemployees with a safe place to work was plain. . . . That rule isdeeply engrained in federal jurisprudence." 41 Furthermore, theFELA legislation was enacted as part of a scheme to protect railroademployees from injury. The FELA, the Safety Appliance Act 42 and

4°Tilier v. Atlantic Coast Line R. Co., 318 U.S. 54, 67 (1943).4 1Bailey v. Central Vermont Ry., 319 U.S. 350, 352 (1943).42Now included in 45 U.S.C.A. §§ 1 (1986) et seq.

Vol. 25, No. I


the Boiler Inspection Act 43 were enacted as complementary legisla-tion designed to promote a safe work environment for employees. 4

The FELA itself imposes liability for "injury or death resulting inwhole or part from the negligence of the officers, agents, or employ-ees of such carrier, or by reason of any defect or insufficiency, due toits negligence, in its cars, engines, appliances, machinery, track,works, boats, wharves, or other equipment. " 45 It has been held bylower federal courts "that when the issue is properly raised and aninstruction is requested, the FELA requires jury instructions on theduty to provide a reasonably safe place to work."46

In the context of FELA litigation the duty to provide a safe placeto work47 has been construed to impose specific obligations on theemployer. As one court has observed:

Although specific standards of care are not stated in the statute, certainemployer duties have become integral parts of the FELA. Theseinclude: the duty to provide a reasonably safe place to work; the dutyto provide reasonably safe tools and equipment; the duty to promulgateand enforce safety rules; the duty to assign workers to jobs for whichthey are qualified and to avoid placing workers in jobs beyond theirphysical capacity; the duty to warn employees of unsafe workingconditions; the duty to protect an employee from intentional tortscommitted by another employee; and the duty to guard against condi-tions in the workplace that cause emotional harm to employees. Inaddition to these duties, which are well beyond those imposed underthe common law of master and servant, the FELA also eliminates orplaces conditions on common law defenses available to an employer.48

43Id. McCoid, supra note 12.44Uric v. Thompson, 337 U.S. 163 (1949); Lilly v. Grand Trunk Western R. Co., 317 U.S.

481 (1943); Jacobson v. New York, N.H. & H.R. Co., 206 F.2d 153 (1st Cir.), aff'd 347 U.S. 909(1954); International-Great Northern R. Co. v. United States, 268 F.2d 409 (5th Cir. 1959).

4545 U.S.C.A. § 51 (1986) (emphasis added). One commentator has stated that:The courts have been most emphatic in insisting upon compliance with the duty to exercisereasonable care to provide the employee with a safe place to work. This is a duty the strictobservance of which would almost universally tend to reduce employee accidents. Appar-ently for this very reason courts have endowed this particular duty with special force andvigor and from time to time have described it as nondelegable, affirmative, and continuing, sothat it "must be continuously fulfilled and positively performed."

Strictly as a matter of abstract law and treating the matter in a vacuum, there is noreason why this duty should possess any greater vigor or virtue or require any greaterdegree of care than, for example, the duty to notify and warn of dangers, but it does.

De Parcq, supra note 9, 18 L. & Contemp. Prob. at 276.46Ragsdell v. Southern Pacific Transp. Co., 688 F.2d 1281, 1283 (9th Cir. 1982); Yehia v.

Rouge Steel Corporation, 898 F.2d 1178, 1184 (6th Cir. 1990).47 Funkkhowser, What is a Safe Place to Work, 17 Ohio St. L.J. 367 (1956).48Ackley v. Chicago and North Western Transp. Co., 820 F.2d 263, 266 n.5 (8th Cir. 1987)

(citations omitted). Also see, Sitzman, supra note 12, 21 Creighton L. Rev. 1081.

January 1994


Notwithstanding the evolution of specific duties as stated above,the courts, including the Supreme Court, have stated that the duty toexercise due care varies with the circumstances. The Supreme Courthas stated that an employer's duty to provide a safe place to workbecomes "more imperative" as the risk increases. "Reasonable carebecomes then a demand of higher supremacy, and yet in all cases it is aquestion of the reasonableness of the care-reasonableness dependingupon the danger attending the place or the machinery. It is that rulewhich obtains under the [Federal] Employers Liability Act." 49

Another court has stated:

An employer's duty of care in a FELA action turns in a general senseon the reasonable foreseeability of harm. Gallick v. Baltimore & 0.R.R., 372 U.S. 108, 117, 83 S. Ct. 659, 665, 9 L.Ed.2d 618 (1963). Theemployer's conduct is measured by the degree of care that persons ofordinary, reasonable prudence would use under similar circumstancesand by what these same persons would anticipate as resulting from aparticular condition. Id. at 118, 83 S. Ct. at 665. At the same time, theFELA provides that the employer's duties are nondelegable andbecome more imperative as the risk to the employee increases. Bailey,319 U.S. at 352-53, 63 S. Ct. at 1063--64. This continuous duty toprovide a reasonably safe place to work, while measured by foresee-ability standards, is broader under the statute than a general duty of duecare. Ragsdell v. Southern Pac. Transp., 688 F.2d at 1283.50

The court then characterized the standard of care in FELA cases as a"heightened" standard of care5 in the sense that "[a]s the risk of harmbecomes more foreseeable, the duty to foresee that risk increases andthe right to assume due care [on the part of the employee] correspond-ingly decreases." 52

The development of the safe place to work cases under the FELA hashad its counterpart in Jones Act cases as is shown in Dempsey v. MACTowing, Inc.,53 where the court summarized the relevant law as follows:

49Bailey, supra note 41,319 U.S. at 353 (citations omitted), quoting Patton v. Texas & PacificRy. Co., 179 U.S. 658, 664 (1901), and cases cited. In Urie, supra note 44, 337 U.S. at 178, thecourt explained:

[WMe think that negligence, within the meaning of the Federal Employers' Liability Act, attachedif respondent "knew, or by the exercise of due care should have known," that prevalentstandards of conduct were inadequate to protect petitioner and similarly situated employees.

In the same opinion it acknowledged that '"olrdinary care must be in proportion to the danger to beavoided and the consequences that might reasonably be anticipated from the neglect."' Id. at 179.

5°Ackley, supra note 48, 820 F.2d at 266.511d. at 266 n.6.52Id. at 267.53876 F.2d at 1542-43 (emphasis added).

Vol. 25, No. 1


Initially, we note that the duty of care a shipowner owes to a seamanhas traditionally been recognized to be a very high one.U Becauseseamen are subject to rigorous discipline while at sea and must accept,without criticism, working conditions on orders from superior officers,admiralty law assigns a heavy responsibility for the safety of seamen tothe owner of the ship. See, e.g., Mahnich v. Southern S.S. Co., 321U.S. 96, 104, 64 S. Ct. 455, 459, 88 L.Ed. 561 (1944). As a corollary ofthis general duty, owners are held to a high degree of care in providinga safe work environment. Spinks v. Chevron Oil Co., 507 F.2d 216, 223(5th Cir. 1975). In light of these general principles, the courts haveallowed a seaman to recover on a Jones Act claim with a lower showingof proximate cause than would be required in a non-admiralty case.

We review the evidence with this "slight negligence" standard and theelements of a Jones Act negligence claim in mind. To find that MACTowing was negligent in its duty to provide a safe working environmentfor Dempsey, the jury had to find some evidence that the condition ofthe deck on ACBL 3088 was unsafe, that the company knew or shouldhave known of the danger, and that it did nothing about the danger. SeePerry v. Morgan Guaranty Trust Co., 528 F.2d 1378, 1379 (5th Cir.1976) ("Under familiar principles of negligence, in Jones Act cases,there must be some evidence from which ajury can infer that the unsafecondition existed and that the owner either knew or, in the exercise ofdue care, should have known of it.").

Likewise in Spinks v. Chevron Oil Company, the court stated:

The duty owed by an employer to a seaman is so broad that itencompasses the duty to provide a safe place to work. By comparison,the seaman's duty to protect himself (the ground for any countervailinglegal interest serving to exculpate the employer) is slight. His duty is todo the work assigned, not to find the safest method of work. This isespecially true when his supervisor, . . ., knows the working methodused by the seaman, and does nothing about it.55

Therefore, even though employer negligence is a prerequisite toliability and negligence is measured under the reasonable personstandard, "the duty to provide a safe place to work" impacts on theapplication of the standard of care to the circumstances (facts) inquestion. Risks in the workplace which "heighten" danger to em-ployees correspondingly "heighten" the duty of their employer to beaware of those risks and to take appropriate action. Danger may be"heightened by risks inherent in the work, unsafe conditions of the

54See also Gavagan v. United States, 955 F.2d 1016, 1022, 1992 AMC 2447 (5th Cir. 1992);Interocean S.S. Co. v. Topolofsky, 165 F.2d 783, 784, 1949 AMC 198 (6th Cir. 1948).

55507 F.2d 216, 223, 1979 AMC 1165 (5th Cir. 1975) (citations omitted).

January 1994

24 Journal of Maritime Law and Commerce Vol. 25, No. I

workplace, and in circumstances where an employee is deprived ofindependence of action, such as in the case of seamen who areexpected to follow orders.' '56 The greater an employee's dependenceon his employer for his safety, the greater the employer's duty toprotect the employee. The level of care required of the employer iscommensurate with the risk of injury to the employee. 57

An employee-plaintiff may also benefit from special rules whichbear directly on the employer's duty to provide a "safe place towork." Generally the FELA does not impose on an employer anabsolute duty to its employees to provide a safe place to work butonly a duty to exercise reasonable care to provide a safe place towork. This statement, however, is not necessarily true in all situa-tions. In Urie v. Thompson, the Supreme Court held that proof of theviolation of a safety regulation contained or promulgated under theSafety Appliance Act or the Boiler Inspection Act established "neg-ligence as a matter of law."'58 The same rule has been applied in Jones

56Darlington v. National Bulk Carriers, 157 F.2d 817, 819, 1947 AMC 315 (2d Cir. 1946)(refusal to charge that seaman was bound to carry out orders of supervisor even when orderrequired seamen to work with unsafe tools or unsafe conditions and that in doing so he doesnot assume the risk-was error); Hall v. American Steamship Company, 688 F.2d 1062, 1065,1983 AMC 134 (6th Cir. 1982) ("Indeed, a seaman may not be contributorily negligent forcarrying out orders that result in his own injury, even if he recognizes probable danger.");Earl v Bouchard Transp. Co., Inc., 917 F.2d 1320, 1323-1324, 1991 AMC 1060, 1063-64 (2dCir. 1990). (The trial court properly instructed the jury that "[I]f you find that the plaintiff wasinjured because he was following the orders of his superiors [sic], the captain, then you cannotfind that there was any contributory negligence. That's true even if plaintiff knew that theactivity which he was ordered to do was dangerous. As a seam[a]n he had the obligation tofollow orders)[alterations in original]; Salem v. United States Lines Co., 293 F.2d 121, 125,1962 AMC 1456 (2d Cir. 1961), aff'd in part, rev'd in part, 370 U.S. 31, 1962 AMC 1456 (1962)("A seaman assumes no risk of employment even of obvious dangers when he acts under theorders of a superior officer."); Merchant v. Ruble, 740 F.2d 86, 88 (1st Cir. 1984) (A workeris not "obligated to protest against the method of operation which he had been instructed tofollow or to devise a safer method, nor was he obligated to call for additional or differentequipment.").

57As stated in Prosser and Keeton, supra note 3, at 208-09:The amount of care demanded by the standard of reasonable conduct must be inproportion to the apparent risk. As the danger becomes greater, the actor is required toexercise caution commensurate with it. Those who deal with instrumentalities that areknown to be dangerous, .. . must exercise a great amount of care because the risk is great.

Although the language used by some courts sometimes seems to indicate that a specialstandard is being applied, it would appear that none of these cases should logically call forany departure from the usual formula. What is required is merely the conduct of thereasonable person of ordinary prudence under the circumstances, and the greater thedanger, or the greater responsibility, is merely one of the circumstances demanding onlyan increased amount of care.58337 U.S. at 189.


Act cases with respect to a breach of safety standards established bystatute or regulation. 59 Thus, the duty to provide a safe place to workis supplemented by specific duties mandated by safety statutes andregulations, the breach of which is considered "negligence as amatter of law." This rule impacts on FELA-Jones Act negligencebecause it imposes an absolute duty, the breach of which is sufficientto carry the plaintiff's burden of proving both the duty and breach ofduty elements of a FELA-Jones Act negligence action. When oneconsiders that the burden of proof on the causation element is"featherweight," it would be fair to say that the burden of provingnegligence in these circumstances is very light.

Furthermore, even in the absence of a statutory or regulatorysafety rule the general maritime law has been interpreted as impos-ing on shipowners an absolute duty to provide seamen with aseaworthy vessel. 6° Unlike the effect of statutory or regulatoryviolations which are negligence as a matter of law, a plaintiff whoproves that an unseaworthy condition caused his injury must stillprove "negligence" to prevail on his Jones Act claim. But proof ofunseaworthiness does help the plaintiff sustain his burden of provingnegligence. Negligence requires proof that the defendant owed aduty to the plaintiff, that the defendant unreasonably breached thatduty, and that this breach of duty caused the plaintiff's injury. Therequirement that a shipowner must provide seamen with a seawor-thy vessel may constitute proof of the "duty" element of Jones Actnegligence. Proof that an unseaworthy condition existed also mayprovide part of the proof of the "breach of duty" element. Althougha plaintiff must still prove that in allowing the unseaworthy condi-tion to exist, the defendant's conduct fell below that of a reasonableperson under the circumstances, the ability to invoke the unseawor-thiness doctrine may substantially lighten a plaintiff's burden ofproving negligence.

The importance of the "duty to supply a safe place to work" isillustrated in Pattern Jury Instruction 4.4 for District Judges in theFifth Circuit which specifically refers to the employer's duty in thisrespect. 61

5 9Kernan v. American Dredging Co., 355 U.S. 426, 1958 AMC 241 (1958).60 Mitchell v. Trawler Racer, Inc., 362 U.S. 539, 1960 AMC 1503 (1960).6 1pattem Jury Instructions (Civil Cases) 4.4 (U.S. Fifth Circuit District Judges Association,

1992 Edition). See note 77 infra.

January 1994


2. Assumption of Risk and Contributory Negligence: Defendant'sStandard of Care

An employer's duty of care must also be evaluated in light of theFELA's modification of the common law defenses of "assumption ofrisk" and "contributory negligence." 62 The Act provides that con-tributory negligence does not preclude recovery but merely dimin-ishes the amount recoverable. It also provides "[t]hat no suchemployee ... shall be held to have been guilty of contributorynegligence in any case where the violation by such common carrier ofany statute enacted for the safety of employees contributed to theinjury or death of such employee. "63 Likewise, the Act abolishes"assumption of risk" as a defense by stating that in FELA actions"such employee shall not be held to have assumed the risks of hisemployment in any case where such injury or death resulted in wholeor in part from negligence of any of the officers, agents, or employeesof such carrier .... '64 Furthermore, "no employee shall be held tohave assumed the risks of his employment in any case where theviolation by such common carrier of any statute enacted for the safetyof employees contributed to the injury or death of such employee."The judicial implementation of the abolition of the defense of assump-tion of risk is quite important. As stated by one commentator: 65

Many persons who would have been barred under the old defense havebeen successful as plaintiffs because of this change in the statute, andthe Court has been careful to protect these plaintiffs against a new kindof playing with the old defense.66 It is not a risk of railroading which a

6Assumption of risk and contributory negligence are not defenses to an action broughtunder FELA. Jacob v. New York, 315 U.S. 752, 755, 1942 AMC 616 (1942); Socony-VacuumOil Co. v. Smith, 305 U.S. 424, 431, 1939 AMC 1 (1939); Joyce v. Atlantic Richfield Co., 651F.2d 676, 1982 AMC 1823 (10th Cir. 1981).

6345 U.S.C.A. § 53 (1986). In a Jones Act case, violation of a statute by the employer barsits use of a contributory negligence defense.

6445 U.S.C.A. § 54 (1986).6Miller, An Interpretation of the Act of 1939 (FELA) to Save Some Remedies for

Compensation Claimants, 18 L. & Contemp. Prob. 239, 245 (1953).6T here had been concern that the former defense of assumption of risk would merely be

"transformed" into a form of denial of negligence or an assertion of contributory negligence.One commentator stated:

An employer is thus without fault under the FELA if he follows general practices andsafety standards in the industry. He is not required to eliminate unsafe working conditionsor introduce new safety devices if the condition of work and equipment are no worse thanthose which prevail in the industry.

Pollack, supra note 12, 18 L. & Contemp. Prob. 302 (1953). As the cases in this article indicate,the abolition of assumption of risk, as interpreted by the courts, has not allowed employers toshift the risk of danger in the job to the employee. The standard of care is not necessarily the

Vol. 25, No. I


workman must accept, when a condition exists that the company canreduce. Proof of that condition is enough to support a plaintiff's primafacie case of fault.

These rules greatly favor employees who assert Jones Act claimsbecause courts have concluded that a seaman's job is dangerous andthat he does not assume the risks of those dangers. Those risks areimposed on the seaman's employer. This means that the employermust take steps to eliminate or minimize the risk to employees and anemployer does not fulfill its responsibility to provide a safe place towork merely by assuming that employees will correct defects in thework place or otherwise take steps to avoid the risk of injury. Also,inasmuch as a seaman is obligated to follow oiders, risks which ariseas a result of following orders are not risks assumed by the seamanand do not make him contributorily negligent. As the court explainedin Tolar v. Kinsman Marine Transit Co.:67

A seaman may not be denied recovery because he proceeds in anunsafe area of the ship or uses an unsafe appliance in absence of ashowing that there was a safe alternative available to him. In an oftcited case the court wrote, "Had an alternative safe route beenavailable to Smith, his deliberate choice of a course known to be unsafecould possibly have indicated contributory fault but mere knowledge ofthe unseaworthy condition and use of the ladder in the absence of ashowing that there was an alternative is not contributory negligence."Smith v. United States, 336 F.2d 165, 168 (4th Cir. 1964). * * * Onecourt has stated the rule, "no risk that can be reasonably controlled bythe ship owner is assumed by the seaman." Reyes v. Vantage S.S. Co.,558 F.2d 238, 244 (5th Cir. 1977).

To determine whether plaintiff was guilty of contributory negligence wemust focus on his actions after he assumed the risk of working with thedefective rig since the defense of contributory negligence requiresevidence of some negligent act or omission by the plaintiff other thanhis knowledgeable acceptance of a dangerous condition.

Along the same vein is this statement from the Fifth Circuit:

Generally, a seaman has no duty to find the safest way to perform hiswork.... ("His duty is to do the work assigned, not to find the safestmethod of work.") Rather, the duty to provide for a safe course of conduct

standard of the industry, and Practice and Pattern Jury Instruction 4.4 for use by District Judgesin the Fifth Circuit expressly so states. Also see Schlichter v. Port Arthur Towing Company,288 F.2d 801, 1961 AMC 1164 (5th Cir. 1961).

67618 F.2d 1193, 1195-96 (6th Cir. 1982) (citations omitted). Also see Had, supra note 56, 688F.2d at 1066; Yehia, supra note 46, 898 F.2d at 1183; Joyce, supra note 62, 651 F.2d at 682-83.

January 1994


lies primarily with the vessel owner. A seaman, therefore, is not contrib-utorily negligent merely because he uses an unsafe tool or appliance orproceeds in an unsafe area of the ship. Only where it is shown that thereexisted a safe alternative available to him of which he knew or should haveknown, can a seaman's choice of an unsafe course of action be properlyconsidered in determining whether he was negligent. 68

In Joyce v. Atlantic Richfield Company, the court stated that a trialcourt should not instruct the jury that an employer has no duty towarn of obvious dangerous conditions or that the plaintiff may becontributorily negligent if he acts in the face of a known dangerouscondition. Instead the court should tell the jury:

You may not find contributory negligence on the part of the plaintiff,however, simply because he acceded to the request or direction of theresponsible representatives of his employer that he work at a dangerousjob, or in a dangerous place, or under unsafe conditions. 69

CONTRIBUTORY NEGLIGENCE-PLAINTIFF' SSTANDARD OF CARE

Prior to 198570 (or perhaps 198171 ), there seemed to be no doubt inFELA-Jones Act actions that the standard of care applied to aplaintiff's conduct for purposes of determining whether or not he wascontributorily negligent was the standard of an "ordinary" or "rea-sonable" person under the circumstances. As the Fifth Circuit statedin Page v. St. Louis Southwestern Railway Co. :72

As to both attack or defense, there are two common elements, (1)negligence, i.e., the standard of care, and (2) causation, i.e., therelation of negligence to the injury. So far as negligence is concerned,that standard is the same--ordinary prudence-for both Employee andRailroad alike.

6Ceja v. Mike Hooks, Inc., 690 F.2d 1191, 1194-95, 1985 AMC 2941, 2945-46 (5th Cir. 1982)(citations omitted).

69Joyce, supra note 62, 651 F.2d at 683.7 Brooks v. Great Lakes Dredge-Dock Co., 754 F.2d 536, 538, modified 754 F.2d 539 (5th

Cir. 1985).71Bobb v. Modem Products, Inc., 648 F.2d 1051, 1057-58, 1983 AMC 708 (5th Cir. 1981).72349 F.2d 820, 823 (5th Cir. 1965). Recently the Fifth Circuit in a Jones Act case, Gavagan,

supra note 54, reiterated this position:We have also stated that the same general negligence ("ordinary prudence") andcausation standards apply to both employer and employee in Federal Employers' LiabilityAct (and, by extension, Jones Act) cases. 955 F.2d at 1019 n.7.

Vol. 25, No. I

January 199 "Slight Negligence," "Slight Care"? 29

Under this approach, in Jones Act cases, once the jury has appliedthe appropriate standard and found employer negligence, it shouldapply the "reasonable seaman under the circumstances" standard onthe issue of contributory negligence. The application of the reason-able seaman standard must, however, be applied in the context ofother rules applicable in FELA-Jones Act cases which bear upon theallocation of employment risks.73 First, under the Jones Act, anemployer has a duty to provide a safe place to work including safetools and equipment, a safe plan for carrying out the work and propersupervision. Second, under the Jones Act, a seaman does not assumethe risks of his employment, and such risks may not be shifted to himmerely by assigning to him the duty of minimizing or eliminatingthose risks. Consequently, courts have said that a seaman is under aduty to follow orders. He is expected to perform the work assigned tohim in the designated place with whatever equipment and tools havebeen supplied by his employer and subject to whatever supervisionhas been provided by his employer. 74 Risks arising from deficienciesin these respects are imposed on the employer as a matter of law evenin situations where an employee recognizes or in the exercise ofreasonable care should be aware of the risk of harm to himself. Inother words an employee will not be held to have assumed a risk evenwhere he recognizes that it is present. 75

Reflecting the case law in the circuit, 76 the Pattern Instructions inthe Fifth Circuit provide that the jury should be instructed as to the

73See note 84 infra.74 See text at notes 67-69, supra.75In Socony-Vacuum Oil Co., supra note 62, 305 U.S. at 430-31, 432, the Court was faced

with the issue of whether or not assumption of risk was a defense in a situation where anemployee knowingly used an unsafe appliance despite the fact that a safe alternative wasavailable. In deciding that it was not a defense the Court said:

The seaman, while on his vessel, is subject to the rigorous discipline of the sea and has littleopportunity to appeal to the protection from abuse of power which the law makes readilyavailable to the landsman. His complaints to superior officers of unsafe working conditionsnot infrequently provoke harsh treatment. He cannot leave the vessel while at sea. Abandon-ment of it in port before his discharge, to avoid unnecessary dangers of employment, exposeshim to the risks of loss of pay and to the penalties for desertion. In the performance of his dutyhe is often under the necessity of making quick decisions with little opportunity or capacity toappraise the relative safety of alternative courses of action.

We think that the consistent development of the maritime law in conformity to itstraditional policy of affording adequate protection to seamen through an exaction of a highdegree of responsibility of owners for the seaworthiness of vessels and the safety of theirappliances will best be served by applying the rule of comparative negligence, rather thanthat of assumption of risk, to the seaman who makes use of a defective appliance knowingthat a safe one is available.76Spinks, supra note 55; Ceja, supra note 68.


employer's duty to exercise reasonable care to provide its employ-ees with a safe place to work. 77 In addition they provide for thefollowing instruction:78

A seaman does not have the same control over his work conditions asdoes a person who works on land. A seaman must, to a certain degree,accept conditions as they are. Therefore, he is not required to devise asafer method of doing the work or to ask for additional equipment. Aseaman's duty is to obey his superiors and do his work as he isinstructed. A seaman is not negligent if he follows the orders of hiscaptain, mate or other superior, even if those orders put him in peril, orrequire him to use defective equipment.

The "circumstances" of a seaman's employment including hisreliance on his employer to provide a safe work place, his obligationto follow orders, etc., must be considered in determining whether heacted reasonably on the occasion in question. But taking those"circumstances" into account should not mean that a seaman is notobligated to avoid injuries which in the exercise of reasonable care heis able to avoid. Certainly he must not make matters worse. Indetermining whether or not his employer owed him a duty andwhether or not his employer negligently breached that duty, it is fairto consider that a very substantial burden has been placed on theemployer. Once it has been determined that his employer has

77Instruction 4.4 Negligence, Pattern Jury Instructions (Civil Cases) Prepared by theCommittee on Pattern Jury Instructions, District Judges Association, Fifth Circuit (1992Edition) provides:

Negligence under the Jones Act may consist of a failure to comply with a duty of law.Employers of seamen have a duty to provide their employees with a reasonably safe placeto work. If you find that the plaintiff was injured because the defendant failed to providehim with a reasonably safe place to work, and that the plaintiff's working conditions couldhave been made safe through the exercise of reasonable care, then you must find that thedefendant was negligent.

The fact that the defendant conducted its operations in a manner similar to that of othercompanies is not conclusive as to whether the defendant was negligent or not.

You must determine if the operation in question was reasonably safe under thecircumstances. The fact that a certain practice has continued for a long period of time doesnot necessarily mean that it is reasonably safe under all circumstances. However, apractice is not necessarily unsafe or unreasonable merely because it injures someone.

A seaman's employer is legally responsible for the negligence of one of his employeeswhile that employee is acting within the course of his job [employment].

If you find from a preponderance of the evidence that the defendant assigned the plaintiffto perform a task that the plaintiff was not adequately trained to perform, you must findthat the defendant was negligent.781nstruction 4.7 Contributory Negligence, Pattern Jury Instructions (Civil Cases) Prepared

by the Committee on Pattern Jury Instructions, District Judges Association, Fifth Circuit (1992Edition).

Vol. 25, No. 1


breached that duty then the conduct of the seaman must be examinedin the context of that breach of duty. A rule that would, in effect,allow a seaman to say: "My employer has violated its duty to provideme with a safe place to work and will be liable to me for all injuriesthat ensue regardless of how unreasonably I respond to the risk,"would seem absurd. On the contrary a rule that imposes a duty on aseaman to act as a reasonable and prudent seaman would act undersimilar circumstances does no violence to the letter or spirit of theFELA-Jones Act legislation. Neither statute was enacted to rewardunreasonable conduct.

Yet, just as the word "slight" has created some uncertainty as tothe appropriate instruction on Jones Act negligence, a similar prob-lem with the word "slight" has surfaced in some cases in theinstruction on contributory negligence. It is submitted that theproblem arises, at least as reflected in reported decisions, from takingthe language used by the court in Spinks v. Chevron Oil Company79

out of context. There the court said inter alia that "the seaman's dutyto protect himself ... is slight." This has been reiterated in somesubsequent Fifth Circuit opinions so and the court in Brooks v. GreatLakes Dredge Dock Company8 held that an instruction on contrib-utory negligence that a seaman must use "ordinary care under thecircumstances for his own safety" was incorrect and prejudicial errorbecause a seaman is under a duty to exercise only "slight care."Compounding the problem is the fact that the Pattern Jury Instruc-tions for District Judges in the Fifth Circuit were amended afterBrooks to include the following statement: "Always bear in mind thata Jones Act seaman does not have a duty to use ordinary care for hissafety. He need only exercise slight care.' '82

In Spinks the trial court had found that both the employer-defendant and the seaman-plaintiff acted negligently.8 3 The issue on

79Spinks, supra note 55; Ceja, supra note 68.8°Bobb, supra note 71, at 1057-58; Ceja, supra note 68.81Supra note 70, at 538.82Instruction 4.7 Contributory Negligence, Pattern Jury Instructions (Civil Cases) Prepared

by the Committee on Pattern Jury Instructions, District Judges Association, Fifth Circuit (1992Edition).

83Spinks was a nineteen year old member of the crew of a barge. At the time of the accidenthe had been aboard for eight months. Part of his job was to clean up oil sprayed from a platformonto the barge. This was a two person job. One person handled the nozzle of the hose that wasused and the other had to keep the engine which propelled detergent through the hose working.This involved keeping the engine supplied with fuel and detergent. This person also had towatch the machine and spray its belt with a non-stick compound. The machine leaked liquidsoap constantly. On the day of the accident Spinks and a fellow seaman, Walker, were engagedin the clean up operation. Walker was older and more experienced. He had been on the barge

January 1994


appeal was whether the trial court's finding that plaintiff's negligencewas the sole cause of his injury was correct as a matter of law. Thus,the principal issue was whether the trial judge applied the properstandard of Jones Act causation, i.e., whether employer negligencecontributed even in the slightest to plaintiff's injury. There was nostandard of care issue on appeal. The resolution of the causation issuerequired the court to define the full scope of the employer's duty toplaintiff. It is submitted that the court in Spinks was speaking to theallocation of employment risks and not as to the standard of care. Thecourt said:8

The duty owed by an employer to a seaman is so broad that itencompasses the duty to provide a safe place to work. (Citationomitted) By comparison the seaman's duty to protect himself (theground for any countervailing legal interest serving to exculpate theemployer) is slight. His duty is to do the work assigned, not to find thesafest method of work. This is especially true, when his supervisor,... , knows the working method used by the seaman, and does nothingabout it.

As between Spinks, a nineteen year old seaman, and his supervisor, itcannot be said that Spinks alone had the duty to realize that carrying

for two and a half years. Walker handled the nozzle and Spinks tended to the engine. In orderto supply fuel and detergent to the engine Spinks had to proceed over a ramp to get the fuel andthe soap. He would fill up two buckets and proceed back over the ramp to the engine. Hecarried a bucket weighing forty pounds in each hand. His supervisor had observed Walker andSpinks carry out this work. Nether the supervisor nor Walker told Spinks not to carry twobuckets at a time. The soapy conditions on the ramp had existed for four hours and had not beenwashed down by Walker and Spinks as it should have. Also there was available an absorbentsubstance which might have made the footing less slippery. Spinks could have used it butdidn't. His supervisor did not direct him to use it. Spinks slipped on the ramp and injuredhimself in the fall.

84507 F.2d at 223 (emphasis added). In determining whether a seaman should be found tohave been contributorily negligent several separate inquiries must be made. These inquiriesinclude: (1) Has the law allocated the particular risk which resulted in injury to the employer orthe employee? (2) If it is allocated to the employer, did employer's conduct fall below thestandard of reasonable care? (omitting causation inquiry) (3) If so (assuming causation by theemployer's conduct), did the employee's own conduct also fall below the standard ofreasonable care? (omitting causation inquiry regarding employee's conduct) The fact-findershould take the allocation of risk into account not only in evaluating an employer's duty to itsemployees but also in evaluating an employee's duty to care for his own safety. If the risk isallocated solely to the employee, the employer is exculpated. If the law allocates the risk to theemployer, the conduct of the employer must be examined to determine whether it actedunreasonably, that is, whether its conduct fell below the standard of reasonable care under thecircumstances. If the employer is found to have been negligent (assuming causation) then theemployee's conduct should be examined to determine whether he acted unreasonably, that is,whether his conduct fell below the standard of reasonable care under the circumstances.

Vol. 25, No. I


two buckets was dangerous, or apply the anti-skid material, or to seethat the deck was washed down.

It is quite clear that the court is not talking about whether Spinks wascontributorily negligent, a finding which the court seemed to accept,but rather whether or not employer negligence also caused hisinjuries. The court focused on the scope of the employer's duty todetermine whether the employer was also to blame for the manner inwhich Spinks performed his work and not on whether placing a dutyon the employer relieved Spinks of his duty to use due care. Nowherein the court's opinion in Spinks does the court even suggest, let alonehold, that an employee does not have a duty to exercise reasonablecare under the circumstances for his own safety or that an employeecan be found contributorily negligent only when his conduct is grosslyunreasonable.

As stated earlier in this article, the FELA, the Jones Act and otherstatutes providing for the safety of railroad workers and seamen havebeen interpreted by the courts as placing a major responsibility for thesafety of employees on the employer and do not permit an employerto shift these risks to the employee. Because the duty to provideseamen with a seaworthy vessel and to otherwise provide a safe placeto work, including safe equipment, tools and supervision is theemployer's non-delegable duty, the employee does not have a duty torectify deficiencies in the workplace. He does not have the duty tomake the workplace safe for himself.8 5 It is in this sense that the courtin Spinks characterized the employer's duty to care for the safety ofits employees as being "broad" and the employee's duty as being"slight." The court was simply saying that in allocating the risks ofemployment, the law imposes a heavier burden on the employer thanon the employee.86

Spinks was a non-jury trial. The court of appeals never discussedjury instructions; there was no occasion to do so. The discussion of

95Of course, an employer may delegate to its employees the duty to make the vessel safe andorder its employees to always act carefully. But such a delegation does not relieve an employerof its legal duty to provide a safe place to work. To hold otherwise would be to allow anemployer to contract out of its legal obligations to its employees simply by contractuallyimposing its duties on its employees. Kelley v. Sun Transp. Co., 900 F.2d 1027, 1990 AMC 2209(7th Cir. 1990); Yehia, supra note 46, 898 F.2d at 1183; McCoy v. United States, 689 F.2d 11%,1983 AMC 2809 (4th Cir. 1982). CL Walker v. Lykes Bros. S.S. Co., 193 F.2d 772, 1952 AMC269 (2d Cir. 1952). See discussion of these cases and others bearing on the point, infra.

8fTe contributory negligence issue is different. Once it has been determined that anemployer violated its duty thereby creating a risk of harm to an employee, what then is theemployees duty to protect himself?

Janwa I N4


the allocation of employment risks related to a legal issue, one thatwas for the court to resolve, not the jury. The FELA and the JonesAct, as they have been interpreted by the courts, allocate employ-ment risks as a matter of law. Included within those risks are thosethat emanate from an unsafe work place. The courts have determinedthat it is the employer's duty to make the work place safe (theemployer's "broad" duty),87 A jury is not asked to determinewhether an employer has a duty to provide a safe place to work. Thatis a legal question that has already been answered by the SupremeCourt.U Therefore, the jury is instructed that an employer has a dutyto provide a safe place to work. Furthermore, when appropriate, thecourt may instruct the jury as to the scope of that duty, such as toprovide safe tools and appliances. Once the jury has been soinstructed, it must determine whether or not the work place wasunsafe, and if so whether or not the employer in the exercise ofreasonable care could have made if safe. In Spinks the court con-cluded that the scope of the employer's duty extended to providingadequate instructions and supervision to a young, inexperiencedemployee. Where an employer assigns work to such an employee anddoes not provide adequate instructions and supervision, the employ-ee's negligence in carrying out his duties is attributable at least in partto his employer. In other words, Spinks' employer should haveanticipated that this young and inexperienced employee might endan-ger himself by selecting an inappropriate and unsafe method for doingthe work, and the employer should have taken steps to prevent thisfrom occurring. The holding in Spinks is simply that under certaincircumstances an employee's negligence may also be attributed to hisemployer if the employer failed to properly supervise the work or togive proper orders as to how the work should be carried out.

Once an employer has breached its duty to provide a safe place towork and has created a risk of harm to an employee, what duty, ifany, does the employee have to care for his own safety? This questiongoes to the standard of care imposed on an employee to avoid injuryto himself. This question was not addressed in Spinks and the trialcourt's finding that plaintiff had been contributorily negligent was notdisturbed. Spinks only discussed the scope of an employer's duty and

"Bailey, supra note 41; Atchison T.& S.F. R. Co., 480 U.S. 558 (1987); Ragsdell, supra note

46, 688 F.2d at 1283; Yehia, supra note 46, 898 F.2d at 1183; Dempsey, supra note 28; Ackley,supra note 48; Spinks, supra note 48; Ceja, supra note 68. Also see, Sitzrnan, supra note 12, 21Creighton L. Rev. at 1081; De Parcq, supra note 9, 18 L. & Contemp.- Prob. at 276.

OBailey v. Central Vermont Ry., 319 U.S. 350 (1943).

Vol. 25, No. I

January I94 "Slight Negligence," "Slight Care"?

employer negligence. It did not discuss the appropriate standard ofcare to be applied in determining contributory negligence.

It is submitted that the courts in Bobb89 and later in Brooks9o tookthe use of the word "slight" as used in Spinks out of context andapplied it not only to the allocation of employment risks betweenemployer and employee, but to the standard of care by which anemployee's conduct is evaluated. In Bobb, the court, in upholding thetrial court's refusal to grant plaintiff's motion for a directed verdict onthe issue of contributory negligence, said: "The language of Spinksconsidered together with its holding, indicates, contrary to plaintiff'sargument, that the seaman has some duty to use reasonable care,even though that duty is slight."91 The court also said: "Although thejury should be properly instructed as to the slight duty of carerequired by a seaman, the question of a seaman's negligence in thiscase remained for the jury."92 Thus, the court applied the term"slight" not only to the scope of duty but to the standard of care. InBobb the reference to "slight duty of care" was dictum, but in Brooksthe appellate court stated:

The court instructed the jury that Brooks, a Jones Act seaman, wasrequired to use ordinary care under the circumstances for his ownsafety at the time of the accident. This court has consistently held that,under the Jones Act, a seaman's duty to protect himself is not ordinarycare, but slight care. 93

89Supra note 71, 648 F.2d at 1057-58.9°Supra note 70, 754 F.2d at 538.9 1Bobb, 648 F.2d at 1057-58 (emphasis added). It is not altogether clear what the court

means. A duty to exercise reasonable care and a duty to exercise slight care are quite differentstandards. The court's subsequent reference to a seaman's "slight duty of care" does nothingto dispel the confusion. In the Brooks case, the court refers only to "slight care." In a latercase, Pickle v. International Oilfield Divers, Inc., the court used the expression "slight, notordinary care," in its original opinion published at 1987 AMC 2038, 2042. In the court'smodified opinion, published in the Federal Reporter, the court changed the standard of care to"a slight duty to use reasonable care." 791 F.2d 1237,1240 (5th Cir. 1986). The Pickle case isdiscussed at length and criticized in Miles, supra note 8, 13 Tul. Mar. L. J. at 90--98.

92Bobb, 648 F.2d at 1057-58 (emphasis added). The court did say that if "the actions takenby the plaintiff were examples of 'bad seamanship' then the juiy might be warranted in findingthat the plaintiff had not fulfilled his slight duty of care." Id. at 1058.

93754 F.2d at 538. The court cited three cases for this proposition. The first, Thezan v.Maritime Overseas Corp., 708 F.2d 175, 1985 AMC 1278 (5th Cir. 1983), cert. denied, 464 U.S.1050 (1984), does not really support the statement in Brooks. In Thezan the court said that"While the seaman's duty to protect himself is slight, the duty does exist." Id. at 180. It thenwent on to state that: "A seaman has no duty to find the safest way to perform his work. Butwhere it is shown that there existed a safe alternative available of which he knew or should haveknown, a seaman's course of action can be considered in determining whether he wasnegligent." Id. at 181. The court indicated further that "age and experience can be considered


The court then held that the "erroneous" instruction was prejudicialerror and remanded the case to the trial court. As has already beenobserved by one commentator, the Fifth Circuit has not consistentlyapplied the Bobb-Brooks "slight duty of care" standard. 94 The court,however, has not repudiated the "duty of slight care" approacheither, and it is being perpetuated in the Pattern Instructions used inthe Fifth Circuit. It is interesting to note that the 1983 edition of theFifth Circuit Pattern Instructions 95 published prior to Brooks did notrefer to the seaman's "slight duty of care." That language was addedin the 1992 edition of the Instructions 96 after Brooks was decided.Also the "slight duty of care" instruction is set out in bracketsindicating, perhaps, that although it is recommended, it should becarefully examined because it may not be appropriate in all cases.Furthermore, it is interesting that neither the Model Instructions inthe Ninth Circuit nor the Pattern Instructions in the Eleventh Circuitmake any reference to "slight duty of care." To the contrary, bothuse the "reasonably careful person" standard. 97 However, the use of

in determining whether a seaman may properly be charged with a duty to select a safe courseof conduct from among safe and unsafe alternatives." Id. In this case, plaintiffhad been asecond engineer for 11 years. His duties included maintenance of boilers which required theremoval of waterwell doors. This was a difficult job because the doors weighed about 170pounds. Four men were available to help him. He had received help in the past, but he also haddone the job alone. While doing the job himself he herniated a disc. He did not ask for help,although it was available. He had control over the watch, the men working for him, and had theauthority to order them to help him. The trial court's denial of plaintiff's motion for a judgmentnot withstanding the verdict on contributory negligence was affirmed as was the jury's findingthat plaintiff was 90% contributorily negligent. The second case, Savoie v. Otto Candies, Inc.,692 F.2d 363, 1985 AMC 220 (5th Cir. 1982), also does not clearly support Brooks. There thecourt said that: "A seaman has some duty to use reasonable care to protect himself even thoughthat duty is slight," 692 F.2d at 371. The court uses the term "reasonable" to qualify "care"which is the usual standard but adds a qualification that the duty is only "slight." It is difficultto understand the qualification. The court did uphold the jury's finding of contributorynegligence: "Where a seaman knowingly exposes himself to conditions of employment whileaware of an illness or disability which makes those conditions unsafe to him, or where a seamanhas the possibility of securing relief from unsafe conditions by informing his superiors of them,but continues to work without doing so, he may be found to be contributorily negligent." Thethird case, Bobb v. Modern Products, Inc., 648 F.2d 1051 (5th Cir. 1981), has already beenreferred to and does provide some support for Brooks in its reference to a jury instruction on"slight duty of care."

"'Miles, supra note 8, 13 Tul. Mar. L.J. at 90-98.95Pattern Jury Instructions (Civil Cases) Prepared by the Committee on Pattern Jury

Instructions, District Judges Association, Fifth Circuit (1983 Edition)."Pattern Jury Instructions (Civil Cases) Prepared by the Committee on Pattern Jury

Instructions, District Judges Association, Fifth Circuit (1992 Edition).97In the Ninth Circuit, the instructions define negligence to include that of the plaintiff

("Reasonable care is the degree of care that reasonably prudent persons would use under likecircumstances to avoid injury to themselves or others"). Manual of Model Jury Instructions for

Vol. -25. No. 1


the "slight duty of care" instruction has not been limited to courtswithin the Fifth Circuit as other courts also have relied on the Brooksholding.98

The "slight duty" standard of care, which in reality translates intoa standard in which a seaman could be found to have been contrib-utorily negligent only for his gross negligence, seems to have no basisin law and can only be misleading. The United States Supreme Courthas neither adopted nor suggested that a seaman's duty of care isanything other than "reasonable care under the circumstances." Itdoes not appear that any court of appeals other than the Fifth Circuithas referred to the seaman's standard of care for his own safety asbeing only "slight." The term "slight" is a comparative term, and itwas so used in Spinks. There, in discussing the allocation of employ-ment risks, the court compared the employer's "broad" duty tosupply a safe place to work with the "slight" duty imposed on theseaman. It was not, however, saying a fact finder is to make anycomparisons. By contrast merely referring to a seaman's "slightduty" to care for his safety as in the Fifth Circuit Pattern Instructionswithout providing any context cannot have much meaning to a layjuror. Unless the term is explained by comparing it to something else,such as a greater standard of care, it is difficult to understand what theterm means. The Spinks court used the term "slight" in comparingthe duties imposed on employers and employees with respect to asafe place to work. Spinks did not use the term "slight" to distinguishbetween a duty to exercise "ordinary" or "reasonable care" underthe circumstances, the traditional standard for determining contribu-tory negligence, and a lesser standard, that is, "slight care under thecircumstances." It did not adopt "slight duty" as the proper standardof contributory negligence. A "slight duty" standard of care in thiscontext would preclude a finding of contributory negligence eventhough a seaman acted unreasonably unless his conduct was a grossdeparture from the conduct of a reasonable seaman under thecircumstances.

the Ninth Circuit 9.01.02 (1993) (emphasis added). Thus, the plaintiff's duty to protect himselffrom injury is the same as the defendant's duty to protect against injuring others.

The Instructions for the Eleventh Circuit define negligence as "the failure to use reasonablecare. Reasonable care is that degree of care which a reasonably careful person would use underlike circumstances." To invoke the rule of comparative negligence defendant need merelyprove by a preponderance of evidence that the plaintiff was "negligent" as that term is definedabove. Pattern Jury Instructions Prepared by the Committee on Pattern Jury Instructions,District Judges Association, Eleventh Circuit (1990 Edition).

9Trindle v. Sonat Marine, Inc., 1990 AMC 867 (E.D. Pa. 1990).

January 1094


Use of a "slight duty" standard of care is unfair to employersbecause it invites juries to disregard a seaman's unreasonable behav-ior except in the most extreme circumstances. It completely disre-gards the variety of circumstances in which seamen are injured.Seamen are not a uniform group, and they are injured in a very widevariety of circumstances. This is particularly true as the scope of thepersons who qualify for seaman status has been broadened to includepersons who do not perform the traditional seaman's navigation andtransportation functions, such as certain oil and gas workers. Con-temporary "seamen" vary greatly in training and experience. Com-pare the raw recruit in Spinks99 with the experienced officer in Thezanv. Maritime Overseas Corp.100 Although perhaps not much couldhave been expected of Spinks under the circumstances, even asympathetic appellate court in that case did not disturb the findingthat Spinks was contributorily negligent in the way in which he did hiswork. Much more, however, ought to be expected of older personnelwho have the experience and training which should enable them toavoid injury.

Let us consider some situations that may shed some light on theappropriate standard for contributory negligence.

1. Dangers Inherent in the Job

It is recognized that a seaman's work is dangerous and that aseaman cannot be faulted for exposing himself to those risks. If aseaman sails on a vessel that is exposed to perils of the sea, he cannotbe held to be contributorily negligent simply because he is injured, forexample, from being thrown about during a storm.101 Likewise, aseaman whose job is fighting fires cannot be said to be negligentmerely because he is injured while fighting a fire. A seaman whose jobit is to repair defective equipment which has leaked oil on the deck,should not be held to be contributorily negligent if he has to walk on

"For a more detailed statement of the facts in Spinks see note 83, supra.

100708 F.2d 175, 1985 AMC 1050 (5th Cir. 1983), cert. denied, 464 U.S. 1050 (1984). Plaintiff

had been a chief engineer. He had done the particular job on which he was injured on otheroccasions and was aware of the potential danger. He did not ask for help, although it wasavailable. He had full control over the men who were working for him on his watch and he hadthe authority to order them to help him. For a more detailed statement of the facts in Thezan,see note 93, supra.

"°lHall, supra note 56, 688 F.2d at 1066 (6th Cir. 1982) (seaman who had not been told toleave the deck was not contributorily negligent in continuing to perform assigned task afterrough weather had arisen).

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the slippery deck and slips and falls.10 2 In each of these situations theemployer, although not an insurer of the safety of its employees, mustexercise reasonable care to provide for the safety of its employees.The fireman, for example, must be given adequate protective gear andproper equipment to fight the fire. Unless he has been hired becauseof his experience and training, he must be provided either with propersupervision or training or both. In all of these situations, an employeeshould not be considered contributorily negligent just because heknowingly undertook to perform a dangerous job. The reason that theemployee is not contributorily negligent is that in each of thesesituations his acceptance of the risk is reasonable under the circum-stances and not because he has a duty to exercise only slight care forhis safety.

2. Following Orders

Although most employment situations involve hierarchies andchains of command, the courts have suggested that the duty to followorders has special meaning at sea. 103 The consequences of disobeyingorders have been considered so severe or impractical that courts haveconcluded that seamen are expected to obey orders. Thus, if aseaman is ordered to engage in work in which he encounters risk, hecannot be faulted for doing so. This is true not only where the risk isinherent in the work, but also where the risk is created by thenegligence of the employer.104 If a seaman is ordered to fasten a lineon deck during a storm he is not negligent merely because he hasexposed himself to risk in obeying the order. If an employee isassigned to work with defective equipment or provided with defectivetools and is ordered or expected to use them, the employee should notbe found to be contributorily negligent. Again the reason for conclud-ing that the seaman is not negligent is that his conduct is notunreasonable under these circumstances.

3. Seaman's Negligence

The examples above assume no independent act of negligence onthe part of the seaman except for undertaking to do his job. Some

1°2 McCoy, supra note 85, 689 F.2d at 1198.10 3Socony-Vacuum Oil Co., supra note 62, 305 U.S. at 430-31.1°4See cases cited in note 56 supra. Also see, Diebold v. Moore McCormack Bulk Transport

Lines, Inc., 805 F.2d 55, 1987 AMC 308 (2d Cir. 1986).

January I N4


courts have said that '"... the defense of contributory negligencerequires evidence of some negligent act or omission by the plaintiffother than his knowledgeable acceptance of a dangerous condi-tion."'1 °5 What happens, however, when the seaman's carelessconduct or mistake itself creates or contributes to the risk? A simpleanswer is not easy to come by. In some circumstances negligence ofthe seaman results in a finding of no negligence on the part of theemployer. In other circumstances negligence of the seaman coupledwith the employer's negligence is not a defense but results in adiminution of recovery, i.e., the seaman is contributorily negligent.Finally, under certain circumstances a seaman's error or mistake orhis knowingly exposing himself to risk is not considered negligence atall, and fault, if there be any, is attributed to the employer. Examplesof this last category include the situations referred to above asdangers of the job and following orders. It should also be noted thatviolation of a statute by an employer prevents it from using contrib-utory negligence to diminish plaintiff's recovery. 0 6

4. Disobedience of Orders

It seems fair that if following orders insulates an employee from acharge of contributory negligence, disobeying orders should, at least,make the employee contributorily negligent if, under the circum-stances, it does not relieve the employer of liability. Where a seamanhas been instructed to wear safety gear such as a life jacket anddrowns when he falls into the water after having removed his lifejacket, his negligence may be the sole cause of his death. 107 In suchsituations, there is no employer negligence on which to predicate aJones Act claim. If the disobedience concurs with employer negli-gence, then the employee should be held to be contributorily negli-gent. Likewise, if through the employer's negligence oil is leakedfrom a piece of machinery onto the deck and a seaman, whilerepairing the machine, slips and falls injuring himself, the seamanshould be held to be contributorily negligent if he violated a standing

l0 5Hall, supra note 56, 688 F.2d at 1066 (quoting Tolar v. Kinsman Marine Transport Co.,618 F.2d 1193, 1196, 1983 AMC 283 (6th Cir. 1980)).

1°6Roy Crook & Sons, Inc. v. Allen, 778 F.2d 1037, 1985 AMC 2731 (5th Cir. 1985).1°TCooperT. Smith, supra note 18, 929 F.2d at 1078. Where an employee has been warned

of a danger, the employer may be found not to have been negligent where the danger itself (openhatchway) was not the product of employer negligence. Valentine v. St. Louis Ship Bldg. Co.,620 F. Supp. 1480, 1988 AMC 1216 (E.D.Mo. 1985), aff'd without opinion, 802 F.2d 464 (8th Cir.1986).

Vol. 25, No. 1


order requiring personnel to wear certain foot gear designed to reducethe possibility of slipping. In the latter instance, the employee'sconduct is unreasonable under the circumstances. Of course, if hehad been ordered by his superior to fix the equipment "immediately"and had no time to go to his quarters to get the shoes, his conductmight be considered reasonable under those circumstances.

5. Disregard of a Safe Alternative

Where an employer provides an unsafe place to work and theemployee shas no choice but to accept that condition, he is notcontributorily negligent for trying to do his job. On the other handwhere the circumstances are such that the employee can avoid orminimize a risk by utilizing a safe alternative which is available to himand of which he knows or of which he reasonably ought to know, thenthe employee should be held to be contributorily negligent if heunreasonably fails to follow the safe course of action. 0 8 Suppose anemployee discovers that he has been provided with a defective ladderto perform his work, and he knows that in another part of the shipthere are other ladders in good condition. The employee, out oflaziness, decides to try to make do with the defective ladder. If hefalls and injures himself, he should be found contributorily negligent.Suppose the employer unknowingly (but negligently) furnishes anemployee with a ladder which the employee finds to be defective.Based on past experience or on other circumstances, the employeehas reason to believe that if he calls the defect to the attention of hissupervisor, he would be told not to use it until it could be replaced

1°8Socony-Vacuum Oil Co., supra note 62; Palermo v. Luckenbach Steamship Co., Inc., 355U.S. 20, 1957 AMC 2275 (1957), modified, 355 U.S. 910 (1958); Burden v. Evansville Materials,Inc., 840 F.2d 343 (6th Cir. 1988) (could have asked for help); Thezan, supra note 93 (could haveasked for help); Ceja, supra note 62 (as to use of defective tow line - appellate court rejectsfinding of contributory negligence because there was no showing of safe alternative as plaintiffused the only one available; upholds finding based on plaintiff's refusal to heed admonition tomove away from dangerous condition); American President Lines, Ltd. v. Welch, 377 F.2d 501,1967 AMC 2223 (9th Cir. 1967), cert. denied, 389 U.S. 940 (1967).In Savoie, supra note 93, 692 F.2d at 372, the court stated:

Where a seaman knowingly exposes himself to conditions of employment while aware ofan illness or disability which makes those conditions unsafe to him, or where a seaman hasthe possibility of securing relief from unsafe conditions by informing his superiors of them,but continues to work without doing so, he may be found to be contributorily negligent.

In Webb v. Dresser Industries, 536 F.2d 603, 608, 1976 AMC 2671 (5th Cir. 1976), cert. denied,429 U.S. 1121 (1977), the court said:

mhe use of unsafe equipment and methods in the face of an available safe alternative,....or the failure to take available action to minimize the dangers in a necessarily risky, courseof action, requires a finding of comparative fault.

January 199


with a proper ladder. It would seem that if the employer were to befound negligent under the circumstances, then the use of the ladderby the employee should be contributory negligence. 109 For contribu-tory negligence to apply in these situations, however, the employeemust actually have had a safe option available and his failure to utilizeit must have been unreasonable under the circumstances.

How then does one reconcile statements to the effect that anemployee does not have a "duty to find the safest way to perform thework" with the rule that a failure to utilize a reasonably available safealternative may result in a finding of contributory negligence? In theinitial assignment of work to a seaman, the law imposes on theemployer the duty to assess the risks presented by that task and theduty to take precautionary measures. In this sense, it is the employ-er's responsibility to find the safest method for performing the work.It is not the seaman's responsibility to substitute for the orders orassignment he has been given his own ideas about how the workshould be done or whether it should be done at all. This is particularlytrue in the case of lower level employees.11 0 If the orders orassignment subject an employee to unreasonable risk of harm, theemployer has breached its duty to its employee and is negligent.Where the seaman has no choice but to obey, he should not befaulted.

Thus, under certain circumstances, a seaman may assume that his,employer has chosen to expose him to risk and that he has no choice,no available safer alternative. In these situations the seaman shouldnot be faulted for doing what he was told to do in spite of the risk. Butcircumstances vary. Suppose an employer tells his employee: "Nev-

109 Thezan, supra note 93; Savoie, supra note 93; Webb, supra note 108. If the employee asksfor assistance or for proper tools and such are not forthcoming he is not contributorily negligent,in proceeding with the situation as it is despite his knowledge of the risk. Theriot v. J. RayMcDermott & Co., 742 F.2d 877 (5th Cir. 1984).

I 0The cases relied on by the court in Spinks illustrate the point. Those cases involved claimsbrought by longshoremen (Sieracki seamen) based on unseaworthiness. In Ballwanz v.Isthmian Lines, Inc., 319 F.2d 457, 462, 1964 AMC 1480 (4th Cir. 1963), cert. denied, 376 U.S.970 (1964), the court said:

The plaintiff was one of a gang of eight longshoremen working in the hold of the defendantship. He had no responsibility for, or authority over, any of his fellow workers. His dutywas to do his work as he was instructed. He was in no sense obligated to protest againstthe method of operation which he had been instructed to follow or to devise a safermethod, nor was he obligated to call for additional or different equipment. If the doctrineof seaworthiness means anything, it is totally repugnant to the doctrine of assumption ofrisk on the part of seamen. The plaintiff in this case was at the very bottom of the hierarchyof command.

Also see, Grzybowski v. Arrow Barge Co., 283 F.2d 481 (4th Cir. 1960).

Vol. 25, No. I


er use defective tools! If the tools you are given are not in goodworking order, get some other tools that are in good working order orask your supervisor to do so. Never, never expose yourself to risk ofinjury by using defective equipment!" Can there be any doubt that aseaman is contributorily negligent if he knowingly uses a defectivetool when he could. have procured a properly functioning tool byfollowing his employer's admonition? Yet even in the absence of anexplicit admonition there are other situations in which a seamanshould assume that his employer does not intend to expose him to aparticular risk of harm and that his employer expects him to use hiscommon-'sense and his experience to avoid that risk or, at least, tominimize it. In other words, a seaman may assume that his employerdoes not expect him to act foolishly. 111 When an employer providesan employee with tools some of which are in good condition and someof which are defective, an employee has no right to assume that hisemployer wants him to use the defective tools and thereby exposehimself to risk of injury. On the contrary, it is reasonable for both theemployee and his employer to assume that given the choice theemployee will use the good tool, and it is unreasonable for theemployee to think otherwise.

Suppose, however, an employer has furnished one tool only and thistool is defective. If the employee uses it and injures himself is hecontributorily negligent? If the employee can obtain a similar tool ingood condition either from another part of the ship or simply by askinghis superior, it would be unreasonable for him to believe that his

II'Blevins v. United States, 769 F.2d 175, 178, 179 (4th Cir. 1985). In Blevins, the plaintiffwas 24 years old and was on his first voyage after attending a six month classroom trainingprogram in marine engineering. He had been ordered to obtain some plywood. After he founda stack of plywood chained to a bulkhead he removed the chains while standing on front of thestack. When the chains were removed he attempted to obtain a sheet of plywood. In additionto the plywood, the stack contained some heavy metal plates. The stack fell forward injuringplaintiff. The finding of contributory negligence was afflirmed. The appellate court distinguishedthis case from those where the seaman was exposed to an "inherently dangerous situation." Itacknowledged that while the seaman "was not responsible for finding the safest method ofwork, he nevertheless had a duty to act reasonably to protect himself from harm." Id. at 179.By standing in front of the stack while removing the chains he deliberately placed himself inwhat he should have realized was an unreasonably dangerous situation. "In practical termsBlevins, may have 'assumed the risk' that the unsecured plywood would fall; in legal terms heacted negligently by placing himself in a zone of danger that he need not have encountered toget the job done." Id. The court did take his youth and inexperience into account but agreedwith the trial court which said: '[o]ne should not need any maritime experience to realize thatboards leaning against a wall ,or other vertical object may tilt over and fall when the chainssecuring them are removed."' The court of appeals added: "This case did not involve a hiddendanger or an unforeseeable risk flowing from an otherwise obvious danger. *** Even thegreenest seaman must be charged with knowledge of the law of gravity." Id.

January 1994


employer did not expect him to procure a properly functioning toolunless there are circumstances which would support that belief, such aswhere his request for a substitute is denied or he is told to make do withwhat has been given to him. In other words the issue boils down towhether, under the circumstances then appertaining including customand the realities of maritime employment, the seaman truly has a saferalternative available to him. If he did, and if he was aware or should havebeen aware of it, then his use of the defective tool was unreasonable.Under these circumstances, he is contributorily negligent, not becausehe breached a duty to find the safest method to do the work, but becausehe unnecessarily exposed himself to risk under circumstances where itwas unreasonable for him to do so.

Conduct Outside the Scope of Employment

When an employee acts for personal reasons and not in a mannerauthorized or required by his employment, his employer either maynot be liable at all or may be able to assert contributory negligence toreduce the amount of damages. Suppose an employee starts a fightwith a fellow employee and is injured. Under these circumstances theemployee who started the fight will be held solely liable.112 As anotherexample, suppose an employee is required to use a particular pas-sageway to get to another part of the ship. Oil has leaked onto thedeck of the passageway and the employee is aware of that fact.Remembering the fun he had sliding on the icy streets during hischildhood, he decides to see how far he can slide on the oil. In theprocess of doing so he falls and injures himself. If the employer wasnot negligent in allowing the oil to spill or in not cleaning it up, theemployee will be found solely at fault. If the employer has beennegligent in allowing the oil to spill and remain on the deck, it seemsclear that the employee was contributorily negligent. In the examplesdiscussed, the employee's conduct measured by the reasonableperson standard is clearly unreasonable under the circumstances.

Sole or Concurrent Negligence of Employees: The Sole Cause Rule

Under the FELA and the Jones Act, the fellow servant doctrine isnot a defense to a claim. If two seaman are working together and one

1120f course, if a superior officer was present and should have intervened in preventing thefight or in terminating it, the employer may be found to have been negligent and the employeecontributorily negligent.

Vol. 25, No. 1


negligently injures the other that negligence is attributable to theemployer under the doctrine of respondeat superior. Suppose, how-ever, a seaman is working alone and he negligently injures himself,can his negligence be attributed to his employer so as to support aJones Act claim? The answer probably depends on whether thenegligence of the employee, under the circumstances then existing, isconsidered to be the sole cause of his injury or whether it concurredwith employer negligence.

a. Inexperienced, Untrained or Low Level Employees

These situations usually present an issue for the jury. As in Spinksthe employee, the only "active" party, has made an error in per-forming his work which resulted in injury to him. Spinks, forexample, decided to carry two buckets at a time, he failed to apply thenon-stick substance and he failed to wash down the area. The firstquestion in these cases is whether the employer was negligent at all.As the Spinks court intimated, when an employer knows or shouldknow that an employee is inexperienced or untrained, it is theemployer's responsibility to issue proper orders or instructions,provide training or supervision, etc. Even if the employee's mistakeamounts to negligence on his part, his negligence is not exclusive.113

The employer is negligent not only because of what the employee didbut because of what the employer failed to do. If the employer isfound to be negligent, the second question is whether the employee'smistake is entirely attributable to the negligence of the employer orwhether, under the circumstances the employee, as in Spinks, wasalso negligent because his conduct was unreasonable even taking hisinexperience, youth, and lack of training into account. Just becausean employer is negligent does not mean that an employee is notrequired to use common sense and whatever experience he does haveto avoid placing himself in danger or in extricating himself fromdanger.114 It is submitted that the standard of reasonable or ordinarycare under the circumstances is a fair and proper standard fordetermining contributory negligence. A very important "circum-stance" in these cases is the lack of knowledge, training and

1'3Not every mistake or error by an employee is negligence. In Spinks, for example, if theonly "mistake" the seaman made was in not applying the absorbent substance because he didnot know about it, never having been instructed on its availability and use, he should not havebeen held to be negligent at all.114See Blevins v. United States, 769 F.2d at 178, 179 (4th Cir. 1985), described in more detailin note 111, supra.

January I W4


experience of the injured employee. The employee may have per-formed his work improperly, but under the circumstances one mayconclude that considering his lack of qualifications and lack ofinstruction or supervision, that a reasonable inexperienced seamanmay have made the same mistake under similar circumstances. Onthe other hand, as in Spinks, even youth and inexperience will notexcuse some errors of judgment.

b. Officers and Supervisory Personnel

When the employee is an officer or supervisor the analysis issomewhat similar but there is a major difference. Officers on a vesselare hired and entrusted with responsibility for the safety of the vessel,crew, cargo and passengers. An employer may justifiably rely on theirtraining, skill and experience. They supervise the activities on thevessel. Thus, when an officer is injured he should be able to recoverdamages only when his injuries result from the negligence of others.If the officer's negligence was the sole cause of his injuries then theemployer should not be liable.115 If, however, the officer's negligencecombines with the negligence of others, then his contributory negli-gence reduces the amount of his recovery." 6 A major distinctionbetween an officer and an inexperienced seaman is that the former issupposed to supervise while the latter is entitled to proper supervi-sion. It is submitted that the proper standard of care which should beapplied is "reasonable care under the circumstances" because itwould be contrary to reasonable expectations and basic fairness tosay that the master and mates on a vessel need exercise only "slight"care for their own safety.

Some earlier cases had formulated a special rule for cases involvingan officer's negligence. In Walker v. Lykes Bros. S.S. Co.," 7 theSecond Circuit referred to two forms of contributory negligence. Itsaid that it was necessary to; distinguish between the duty "theinjured party [in this case the Master] has to the wrongdoer" and "aduty which the injured person has consciously assumed as a term of

nSRoche v. United States, 1990 AMC 26% (E.D. La. 1990). The court stated that plaintiffwho was a bosun in charge of tank cleaning operations "was provided both the ability andoption to lift the pump, as he contends was safe and appropriate, with two men; he cannot nowcomplain for having chosen otherwise." Id. at 2697. The court added that if the defendant wasliable that it would assign to the plaintiff "a large percentage of comparative fault." Id. at 2698n.12.

" 6See Thezan, supra note 93.17193 F.2d 772, 1952 AMC 269 (2d Cir. 1952).

Vol. 25, No. 1


his employment." Breach of the former results in a diminution ofrecovery while breach of the latter results in a bar to recovery. In thiscase the Master failed to have some broken file cabinets in hisquarters repaired. His failure to do so was not merely a momentarylapse but a breach of his contractual obligation to his employer. Thisapproach was followed by the First Circuit in Peymann v. PeriniCorporation.118 There, a second engineer who had the primaryresponsibility for performing certain work negligently exposed him-self to injury and the court found that he was barred from recovery.These cases stand for the proposition that where one has contractu-ally undertaken to perform certain duties and has the primaryobligation for doing so, including the correction of defective condi-tions, breach of this duty precludes recovery for injuries that resultfrom the breach. They suggest that even though there might be someminimal preexisting employer negligence, the employer has a right tohave the employee properly perform his duties. These decisions donot purport to be "sole negligence" cases, although this is alluded toin Peymann. Recently, however, Peymann was distinguished byexcluding from the rule situations where the plaintiff was not respon-sible for creating the condition that caused his injuries even though hewas ordered to correct the defective condition and was negligent innot doing so. 119 In such situations the employer is entitled to rely onthe employee to exercise reasonable care, knowledge and skill as anexperienced person. The employee's failure to do so results in thediminution of damages up to 100%. This appears to move closer to the"sole fault" view preferred in more recent decisions.

In Villers Seafood Co., Inc. v. Vest,1 20 which involved a claim forinjuries by a Master based on allegations of a defective ladder, thecourt first refused to hold that either the Master's knowledge of thedefective condition or his negligence in failing to discover and correctit would bar recovery. It noted that assumption of risk and anycontributory negligence only mitigated damages. The court thenindicated that even if it followed the Walker-Peymann rule, it wouldnot extend it to situations where there "was no misconduct or actualknowledge of an unseaworthy condition" despite the fact that it wasthe Master's duty to keep the vessel in repair.

18507 F.2d 1318, 1975 AMC 1698 (lst Cir. 1974), cert. denied, 421 U.S. 914 (1975).

" 9Joia v. Jo-Ja Service Corp., 817 F.2d 908, 1988 AMC 2259 (lst Cir. 1987), cert. denied, 484U.S. 1008 (1988).

120813 F.2d 339, 1987 AMC 1850 (1 1th Cir. 1987).

January I99W


Kelley v. Sun Transportation Company121 purports to adopt theprevalent, contemporary rule, that is, that negligence of an officer orof supervisory personnel does not totally bar recovery unless theemployee's negligence was the sole cause of the injury. The courtstated:

We believe that the modem cases after Walker and Peymann presentthe prevalent rule of law in the United States. The inquiry at trial shouldendeavor to apportion responsibility for the injury. This does not mean,however, that a supervisory employee will recover in every case for.injuries suffered on the ship. A ship's officer can be found to benegligent with respect to his accident. If such negligence is the solecause of the injury, the employer's non-negligence bars recovery. SeeBoudreaux v. Sea Drilling Corp., 427 F.2d 1160, 1161 (5th Cir. 1970).As Judge Hand noted in Walker, the bar is not based on the contribu-tory negligence of the officer, but on a finding of no negligence of theemployer. But when the employer is negligent, and that negligence isbased on activity other than that of the ship's officer, recovery ispermitted to the extent of the employer's negligence.

The defendant, Sun, would have the court acknowledge the supervi-sory duties of Mr. Kelley as first mate and end the inquiry there.Accepting such a proposition effectively would bar all ship's officersfrom recovery for injuries caused at least in part by the negligence ofanother seaman. This approach frustrates the congressional intentembodied in the Jones Act, which was designed to give seamen anavailable remedy for injuries sustained in an inherently dangerousprofession. Our rejection of a rule absolutely barring recovery by aship's officer comports with the statute's rejection of a harsh applica-tion of contributory negligence.

c. Experienced Employees and Specialists

The most difficult situation arises when an experienced, skilledemployee is injured. The difficulty stems, however, not from thecontributory negligence issue, which can be readily resolved underthe standard of the reasonable seaman under the circumstances, butfrom the issue of employer negligence. Let us consider an employeewhose duties include the maintenance and repair of equipment. He ison the vessel, at least in part, to correct things that go wrong or toprevent things from going wrong. Assume that a piece of equipmentmalfunctions and he is dispatched to repair it. In attempting to repairthe defect he is injured. Like the officer, the specialist should be ableto recover when his injuries result from the negligence of others. If his

12 1Supra note 85, 900 F.2d at 1031.

Vol. 25, No. 1


negligence combines with that of others, then his contributorynegligence should reduce the amount of his recovery.

Suppose, however, the only other negligence is that of the Master,who knew of the defect in the equipment when the vessel left port.The Master decided to take the risk that the defective equipmentwould be sufficiently operational until the vessel reached its next portwhere other repairs had been scheduled. He told the repairman tokeep an eye on the equipment. Assume that the Master's decision andhis action in pursuing the voyage instead of first having the defectrepaired would support a finding that the vessel and crew wereunreasonably exposed to risk of harm. When the equipment began tomalfunction, the repairman reported this to the Master, who in turntold the repairman to fix the equipment. If, in attempting to repair theequipment the repairman is injured through no fault of his own, he isclearly entitled to recover damages. But suppose he negligently turnsa component of the equipment the wrong way causing it to come apartwith such force that part of it strikes him in the eye. It would seemthat he is still entitled to recover damages, subject to reductionbecause of his contributory negligence.

It might be argued that the only reason he is on the vessel is to takecare of defects; this is part of his work. Thus, employer negligenceshould not be considered the cause of his injury. What differenceshould it make whether the risk (defect) arose with or withoutemployer negligence? When the employee confronted the situation hefaced a piece of defective equipment, regardless of its cause. Inessence the employer is arguing that either it was not negligent as tothe plaintiff or its negligence was superseded by the negligence of theemployee. Its negligence did not cause the employee's injury; theemployee's own negligence did. But there are several responses tothis argument. First, not every defect implicates the negligence of theemployer. If the employee had been injured through no fault of hisown, he would have had a valid claim against his employer under theJones Act if the employer had been negligent, but not otherwise.Therefore, the presence of employer negligence is crucial. It is nodefense to argue that the same risk could have been created evenwithout employer negligence. Second, an employee does not assumethe risks of his employment, that is, those presented in repairingdefective equipment even when that is his job and he is aware of therisk. Finally, the Jones Act rule on causation requires that employernegligence play only the slightest role in bringing about the employ-ee's injury. An employee may recover damages even where his own

January I9N4


negligence played the major role in bringing about his injury, althoughin such circumstances his damages will be substantially reduced. 122

Suppose, however, that the defect had been latent and that theemployer had not been negligent in any respect. The sole negligenceis that of the repairman in turning the component the wrong way.There should be no question that if the employer had been negligentunder these circumstances, the employee likewise should be found tobe contributorily negligent. The sticky question is whether thenegligence of the injured employee can be attributed to his employerin the first place in a Jones Act action. The employee may argue thatan employer is liable for the negligent conduct of its employees. Anemployer knows statistically that over a period of time some of hisemployees will act negligently and that their negligent conduct willcause harm to either the vessel, the cargo or to members of the crew.What difference should it make which member of the crew isnegligent or which member of the crew is injured. If a member of thecrew negligently injures a member of the crew, the employer shouldbe liable even though the negligent employee and the injured em-ployee are one and the same individual. The FELA and the Jones Acthave singled out two high risk occupations for federal safety protec-tion. In doing so Congress recognized the danger to railroad workersand seamen, including the risk that they might injure themselves.

The employer's counter argument is more compelling. The doctrineof respondeat superior was created so as to protect third parties notemployees.1 23 In fact, until abrogated by the FELA and the JonesAct, the fellow servant doctrine precluded recovery by an employeeagainst his employer for injuries negligently inflicted by anotheremployee let alone self-inflicted injuries. When an employer hires anemployee who purports to have some expertise because of experi-ence, training or education, the employer has a right to rely on thatexpertise.1 24 The FELA and Jones Act are predicated on liabilitybased on fault. They are not workers' compensation statutes. Aseaman is already protected under a strict liability regime under thelaw of unseaworthiness12 5 and under maintenance and cure he is even

122Thezan, supra note 93 (90% contributory negligence).

123St0ot v. D & D Catering Service, Inc., 618 F. Supp. 1274 (W.D. La. 1985), aftd, 807 F.2d1197, 1987 AMC 1288 (5th Cir. 1987), cert. denied, 484 U.S. 821 (1987).

124Joia, supra note 119; Nieva v. United States, 1988 AMC 2222 (S.D. N.Y.), aft'd, 831 F.2d284 (2d Cir. 1987).

125As to unseaworthiness actions, see Matthews v. Ohio Barge Lines, Inc., 742 F.2d 202 (5thCir. 1984). In Snow v. Boat Dianne Lynn, Inc., 664 F. Supp. 30, 1988 AMC 512 (D. Me. 1987),

Vol. 25. No. 1


protected against injuries he negligently causes to himself. It is simplyunfair to attribute the negligence of an employee to his employerwhen the employer reasonably believed that the employee wascompetent to perform his duties in a proper manner. An employerwho has acted in all respects in a reasonable manner should not beliable to an employee who was the sole cause of his own injuries. 26

Having said that, however, some caution must be used in applying therule of sole cause. The last example under consideration has assumedthat the employee was the sole cause of his injury. There undoubtedlyare situations, however, when even the work of an experiencedemployee is subject to supervision or review. Where there is a basisfor finding employer negligence, apart from the actions of the injuredemployee, then the rule of comparative negligence applies.

It is submitted that the standard of a reasonable seaman under thecircumstances is the proper standard to be applied to determine if aseaman was contributorily negligent. It is the traditional rule. It isclear and because it takes the circumstances of the occasion intoaccount, it is a flexible rule. The use of comparative negligence is fairto the seaman. It is also fair to the seaman's employer because it fallsshort of imposing de facto strict liability which is possible under a"slight duty of care" standard and holds an employee responsible tothe appropriate degree for his own behavior when it is determined tobe unreasonable under the circumstances.

CONCLUSION

Analytically, one might believe that the formulation of the employ-er's duty of care for its employees' safety and the employees' duty tocare for their own safety are discrete considerations whereby the factfinder must first determine if the defendant was negligent. If theemployer is found to have breached its duty to exercise reasonablecare for the safety of its employee, then the causation issue must be

the court refused to apply the rule to an unseaworthiness claim with respect to a preexistingunseaworthy condition. The court said:

a seaman is solely responsible for his injuries only if the seaman creates the hazard thatcauses the injury. If, however, the hazard is an existing condition of the ship, the ship itselfis unseaworthy ... , and the exception does not apply. The seaman's responsibility toremedy a pre'existing hazard is relevant to the issue of the seaman's comparative fault,and thus his damages.126There is no compelling reason why the sole liability rationale should not be applicable to

experienced personnel. Sotell v. Maritime Overseas, Inc., 474 F.2d 794, 1973 AMC 579 (2d Cir.1973); Donovan v. EssoShipping Company, 259 F.2d 65, 1958 AMC 2096 (3d Cir. 1958), cert.denied, 359 U.S. 907 (1959).

J anuary I W4


resolved. If that "featherweight" burden has been satisfied, then theemployee's breach of duty becomes relevant on the issue of damages.What appears to be analytically correct, however, ignores the appli-cability of special rules which regulate the allocation of duties to theemployer, and which may determine whether or not the employerowed and breached a duty to its employee. Thus, defining theseaman's duty to himself and to his employer also defines the scopeof the employer's duty to the seaman. The more a seaman is requiredto care for his own safety, the less responsibility is placed on hisemployer. Conversely, the more a seaman is entitled to rely on theemployer for his safety, the greater is the employer's duty to care forits employee. 127 Obviously, rules which impose on an employer aduty to provide a safe place to work, including a seaworthy vessel,directly affect and impose a greater or higher burden on the employerthan a rule which places the risk of an unsafe workplace on the

127This correlation between the scope of an employee's duty to care for his own safety and

the employer's duty to care for the safety of its employees was discussed in Ackley v. Chicago& North Western Transp. Co., 820 F.2d 263, 267 (8th Cir. 1987). There the court remarked that:

What the Railroad is entitled to assume about its employees' behavior, therefore, bearsdirectly on the question of its own duties. See Atchison, T. & S. F. Ry. Co. v. Seamas, 201F.2d 140, 142 (9th Cir. 1952). If the Railroad may assume that an employee will not actnegligently, then the scope of foreseeability charged to the Railroad is significantlydiminished.

Thus, the court concluded that in situations in which an employee is exposed to danger the

employer may not assume that the employee will take proper steps to avoid the danger. Theemployer has the duty to provide a safe place to work and the employer must take steps toeliminate the risk of danger.

In Bobb, supra note 71, the issue was whether the court should have directed a verdict thatthe plaintiff was not contributorily negligent. After noting that contributory negligence does"not defeat a seaman's claim" but merely reduces the claim in proportion to the plaintiff's fault,the court stated that in order for contributory negligence to exist, the plaintiff must have a dutyin the first place to act or refrain from acting. In Ceja, supra note 68, the court remarked that

"[a]lthough the seaman has a duty to use reasonable care, this duty is tempered by the realitiesof maritime employment 'which have been deemed ... to place large responsibility for hissafety on the owner.' " 690 F.2d at 1193 (citations omitted).

Notwithstanding that some courts have characterized the seaman's duty to care for himself

as being only "slight care," once seaman negligence has been established, it appears that theemployer's burden of showing causation is measured by the same lax standard as the seaman'sburden of proving that the employer's negligence caused his injury. Under the varioussuggested jury instructions, the jury should be instructed that the plaintiff's damages will bereduced to the extent that his negligence contributed to his injury. Pattern Jury Instruction 5.1for District Judges in the Eleventh Circuit applies the same "legal cause" definition in regardto assertions of the plaintiff's negligence. Pattern Jury Instruction 4.7 for District Judges in theFifth Circuit provides in pertinent part: "If you find that defendant was negligent ..., but youalso find that the accident was due partly to the contributory negligence of the plaintiff, then you

must determine the percentage the plaintiff's contributory negligence contributed to theaccident." In the Ninth Circuit, the same definition of negligence applies to the plaintiff and thedefendant.

Vol. 25, No. 1


seaman-employee. 128 But so do rules which relate to the abolition ofcontributory negligence and assumption of risk as complete defenses.The acknowledged danger of seamen's work and the duty of seamento follow orders prevent the shifting of certain risks to a seaman andmay preclude a finding of assumption of risk or contributory negli-gence. From a pragmatic perspective, the application of the totality ofthese rules 129 does make it easier for an employee to recover damagesin Jones Act and FELA cases than in ordinary negligence actions.130It is submitted that although the jury should be instructed on theserules when applicable, the jury should not be instructed on "slightnegligence" in regard to evaluating the defendant-employer's duty toits employees and should not be instructed on the duty of "slightcare" of an employee with respect to his safety.

128Ceja, supra note 68, 690 F.2d at 1193 ("[U]nder the Jones Act, a vessel owner will bedeemed negligent if he fails to exercise reasonable care to maintain a reasonably safe workenvironment."); Yehia, supra note 46, 898 F.2d at 1183, 1184, quoting McCoy v. United States,689 F.2d 1196, 1198 (4th Cir. 1982) (employer has a duty to use reasonable care to provide safeplace to work and employee is entitled to an instruction to that effect); Joyce, supra note 62, 651F.2d at 681 (Jones Act "negligence, however, may arise from a dangerous condition on or aboutthe ship, failure to use reasonable care to provide a seaman with a safe place to work, failureto inspect the vessel for hazards and a variety of other breaches of the shipowner's duty ofcare. "1).

129Standard for allowing a case to be resolved by a jury, featherweight causation, safe placeto work, contributory negligence, and assumption of risk.

13°Sitzman, supra note 12, 21 Creighton L. Rev. at 1082.

January 1994

Journal of Maritime Law and Commerce, Vol. 25, No. 1, January, 1994

Inconsistencies Between OPA '90 andMARPOL 73/78: What is the Effect on LegalRights and Obligations of the United States

and Other Parties to MARPOL 73/78?

AKINTAYO A. AYORINDE*

I.INTRODUCTION

The discharge of oil into the oceans and other navigable watersposes an increasingly serious environmental problem. The problem ofmarine pollution defies national solutions. It is a condition whichknows no national boundaries. This ambulatory character can frus-trate efforts to deal with the problem because ofjurisdictional barriersto acquiring control over its sources. The International Conventionfor the Prevention of Pollution from Ships, and its 1978 Protocol 2

(MARPOL 73/78) are international responses to the threat of contam-ination of the marine environment. These treaties establish globalstandards for the prevention of vessel-source oil pollution.

On August 18, 1990, the United States adopted a new legal regimegoverning the discharge or threat of discharge of oil on the navigablewaters adjoining shorelines and exclusive economic zone of theUnited States.3 The new legal regime, known as the Oil Pollution Act

*LL.B., University of Ife, Nigeria; M.C.J., Howard University School of Law; LL.M.

(International and Comparative Law), Georgetown University Law Center. The author wouldlike to thank Allan I. Mendelsohn, Esq., Warren L. Dean, Jr., Esq., and Admiral Sidney A.Wallace for their assistance in the preparation of this article.

lInternational Convention for the Prevention of Pollution from Ships, Nov. 2, 1973, 12I.L.M. 1319 [hereinafter "MARPOL 73"].

2 Protocol of 1978 Relating to the International Convention for the Prevention of Pollutionfrom Ships, 1973, Feb. 17, 1978, 17 I.L.M. 546 [hereinafter "MARPOL 73/78"].

3Section 511(d) of the Restatement (Third) of The Foreign Relations Law of the UnitedStates defines the exclusive economic zone as a belt of sea beyond the territorial sea that maynot exceed 200 nautical miles from the baseline from which the breadth of the territorial sea ismeasured [hereinafter "Restatement (Third)"]. This subsection follows Articles 55 and 57 ofthe United Nations Convention on the Law of the Sea, Dec. 10, 1982, U.N. Doc. A/Conf. 62/122(1982), reprinted in 211 I.L.M. 1261 (1982). In 1983, President Ronald Reagan, by Proclamation


of 1990, 4 establishes a comprehensive federal scheme for the preven-tion, removal, liability, compensation and penalties relating to oilpollution. This article will consider the relationship between OPA '90and MARPOL 73/78, more particularly addressing the followingquestions. First, if OPA '90 confficts with an amendment to MAR-POL 73/78 that is negotiated and enters into force after OPA '90'seffective date, which governs? Second, if the United States declaresthat it does not accept an amendment to MARPOL 73/78 and theamendment later enters into force, what is the effect on legal rightsand obligations under MARPOL 73/78 in respect of the United Statesand other parties to MARPOL 73/78? The article will conclude bymaking recommendations for actions which will be in the bestinterests of international maritime trade and protection of the marineenvironment.

II.

THE INTERNATIONAL MARITIME ORGANIZATION

For a host of reasons, the establishment of an inter-governmentalorganization concerned exclusively with merchant shipping afterWorld War II was inevitable. The establishment of the InternationalCivil Aviation Organization (ICAO) by an international convention in19445 undoubtedly provided the final impetus. Thereafter, a counter-part inter-governmental organization for maritime affairs became apolitical as well as practical necessity. The International MaritimeOrganization 6 was conceived at an international conference in

No. 5030, established an exclusive economic zone of the United States and asserted rights overnatural resources thereof, both living and nonliving, as well as over economic activities in thezone. 48 Fed. Reg. 10601 (1983); 3 C.F.R. § 2 (1983); 16 U.S.C. § 1453; 83 Dep't. State Bull.,No. 2075, at 71 (1983). The proclamation also asserted United States jurisdiction over allartificial islands, as well as installations and structures in the zone having economic purposes.In respect of protection and preservation of the marine environment, the proclamation declaredthat the United States would exercise its rights to the exclusive economic zone in accordancewith the rules of international law and that other states will enjoy in the zone the high seasfreedoms of navigation, overflight, the laying of submarine cables and pipelines, and otherinternationally lawful uses of the sea.

40il Pollution Act of 1990, Pub. L. No. 101-380, 104 Stat. 484 (1990), reprinted in 1990 U.S.Code & Admin. News 484; 33 U.S.C. §§ 2701-61, 43 U.S.C. H 1642, 1651, 1653, 1656, 26U.S.C. §§ 4612 & 9509 (1990) [hereinafter "OPA '90"].

5Convention on International Civil Aviation, Dec. 7, 1944,61 Stat. 1180, T.I.A.S. No. 1591,15 U.N.T.S. 295.

6The original official title was Convention on the Intergovernmental Maritime ConsultativeOrganization, March 6, 1948, 9 U.S.T. 621, T.I.A.S. No. 4044. The title was changed to theConvention on the International Maritime Organization, Nov. 14, 1975, IMCO No. 68.01.B(entered into force May 22, 1982). Amendments to the IMCO Convention are as follows: Sept.

Vol. 25, No. I

OPA '90 and MARPOL 73/78

Geneva in 1948, but its governing Convention did not enter into forceuntil March 17, 1958 and its first organizational assembly met inLondon in January 1959.

A. IMO'S Historical Development

A number of organizations preceded the establishment of IMO.The Comitd Maritime International 7 created in 1897, and still inexistence today, had been responsible for the preparation of a numberof conventions dealing with, among other issues, collisions, salvageand assistance at sea, limitation of shipowners' liability and exemp-tion clauses in bills of lading.

During the First World War, the need to coordinate the allocationof available tonnage among the Allied Powers resulted in the creationof the Allied Maritime Transport Council, which lasted from 1917 to1919. The advent of the Second World War again prompted the majorallies to provide for the effective utilization of their shipping re-sources. As a result, the Combined Shipping Adjustment Board wascreated in 1942. In 1945, most of its functions were transferred to theshort-lived United Maritime Authority. The purpose of the Authoritywas to ensure the continued availability of the tonnage resources ofthe various nations in light of the changed conditions prevailingduring the later phases of the Second World War.

When the United Maritime Authority was dissolved in 1946, afterthe termination of hostilities, it was succeeded by the United Mari-time Consultative Council, itself a predecessor of the ProvisionalMaritime Consultative Council (PMCC) created in 1947. The PMCCexisted until the foundation of IMO. Matters related to shipping werealso discussed within the League of Nations and the United Nations.The League had created a Committee for Communications andTransit in 1921. In 1946, that Committee transferred its functions tothe Temporary Transport and Communication Commission of theEconomic and Social Council of the United Nations. In 1947, thebody was replaced by a permanent Transport and Communication

15, 1964, 18 U.S.T. 1299, T.I.A.S. No. 6285 (entered into force Oct. 6, 1967); Sept. 28, 1965,19 U.S.T. 4855, T.I.A.S. No. 6490 (entered into force Nov. 3, 1968); Oct. 17, 1974, 28 U.S.T.4607, T.I.A.S. No. 8606 (entered into force Apr. 1, 1978); Nov. 14, 1975, IMCO No. 68.01.B(entered into force May 22, 1982) [hereinafter "IMO"]. See generally, Lampe, The NewInternational Maritime Organization and Its Place In Development of International MaritimeLaw, 14 J. Mar. L. & Com. 305 (1983).

7Berlingieri, The Work of the Comitt Maritime International: Past, Present and Future, 57Tul. L. Rev. 1260 (1983).

JanuarJy 1994


Commission.8 It was against this background of temporary and ad hocorganizations that IMO came into being.9 The IMO is a specializedagency of the United Nations in the field of shipping. It is a creationof and its operations are governed by the IMO Convention.10

In the IMO, the major working organs are constitutional bodies: theMaritime Safety Committee, the Legal Committee and the MarineEnvironment Protection Committee."

B. IMO as an International Legislator

IMO's legislative instruments can be classified into two broad cate-gories: those of a formal nature and those which are less formal andmore flexible. The former category includes treaties; the latter consistsof recommendations. Article 2(b) of the IMO Convention defines thepurposes of the Organization. IMO is to provide for the drafting ofconventions, agreements or other suitable instruments and recommendthem to governments and inter-governmental organizations and toconvene such conferences as may be necessary.12 Article 15(j) empow-ers the Assembly to recommend to members for adoption regulationsand guidelines concerning maritime safety, the prevention and control ofmarine pollution from ships and other matters concerning the effect ofshipping on the marine environment assigned to the organization by orunder international instruments, or amendments to such regulations andguidelines which have been referred to it.13

Pursuant to these provisions, the texts that regularly emanate fromthe IMO are recommendations. Conventions can only be adopted byconferences convened by the Organization. Thus, IMO conventionsare not attributable to the Organization itself, but to the memberstates. In recent times, however, IMO organs have assumed theresponsibilities of making amendments to conventions originallyadopted by plenipotentiary conferences. Because IMO is the majorinitiator of standards contained in the conventions elaborated by such

SUnited Nations Conference (1948), United Nations, ECOSOC, Doc. E/Conf. 4. Seefurther, two texts entitled, respectively, Meeting about the Inter Governmental MaritimeConsultative Organization, London, October 1953, and Preparatory Committee of IMCO, 1st -4th sessions, 1948-59.

9C. E. Henry, The Carriage of Dangerous Goods by Sea: The Role of the InternationalMaritime Organization in International Legislation 37 (1985) [hereinafter "Henry"].

10See IMO Convention, supra note 6, art. 54. See also, I. Arroyo, International MaritimeConventions 16 (1990).

1IMO Convention, supra note 6, art. 12.121d. at art. 2(b).13Id. at art. 15(j).

Vol. 25, No. I


conferences, and because of the legislative nature of the activity by IMOorgans when adopting amendments to those standards, a real link doesexist between activities of the Organization and the continuing obliga-tions of member states under the respective Conventions.14

C: Accelerated Amendment Procedure in IMO Conventions

The question of accelerated amendment procedures was dealt with byIMO's various committees, originally the Maritime Safety Committeeand the Legal Committee. These bodies prepared proposals aimed atbringing more rapidly into force amendments to Conventions for whichIMO is the depository.15 Thus, it was decided that the most practicalway of dealing with the problem was the incorporation of new amend-ment procedures into new conventions or into existing conventionswhenever the latter came up for revision. 16 Furthermore, both commit-tees were of the view that the most suitable method of accelerating theentry into force of amendments to technical provisions of conventionswas a procedure based on the principle of tacit acceptance.17

Article 66 of the IMO Convention provides:

Texts of proposed amendments to the Convention shall be communi-cated by the Secretary-General to Members at least six months inadvance of their consideration by the Assembly. Amendments shall beadopted by a two thirds majority vote of the Assembly. Twelve monthsafter its acceptance by two-thirds of the Members of the Organization,other than Associate Members, each amendment shall come into forcefor all Members.' 8

Article 66 enables an amendment to enter into force for all memberstates of IMO once the amendment is ratified by two-thirds of themembership of the Organization.

Article 16 (2)(f)(ii) of MARPOL 73/78 prescribes the tacit amend-ment procedure. It provides:

14 Henry, supra note 9, at 58.15Resolution A.249 (VII) of Oct. 15, 1971. The Maritime Safety Committee dealt with the

subject at its 15th and 16th Sessions (Mar. 20-24, 1972 and Oct. 30-Nov. 3, 1972). The LegalCommittee considered the subject at its 12th Session (Apr. 17-21, 1972), its 14th Session (Sept.18-22, 1972), and its 17th Session (Jan. 22-26, 1973). The results of these sessions arereproduced in IMO Official Records, Docs. MSC XXV/17, Apr. 4, 1972, paras. 81-87 andAnnex XXI; MSC XXVI/19 paras. 67-75; LEG. X11/8, Apr. 25, 1972, paras. 14-23, and AnnexIII; LEG. XIV/4, Sept. 27, 1972, paras. 6-37, and Annex; and LEG. XVII/7, Jan. 31, 1973,paras. 5-17 and Annex I.

16Id.

'7Id.18See IMO Convention, supra note 6, art. 66.

January 1994


An amendment to an Annex to the Convention shall be deemed to havebeen accepted in accordance with the procedure specified in sub-paragraph (f)(iii) unless the appropriate body, at the time of itsadoption, determines that the amendment shall be deemed to have beenaccepted on the date on which it is accepted by two-thirds of theParties, the combined merchant fleets of which constitute not less thanfifty percent of the gross tonnage of the world's merchant fleet.Nevertheless, at any time before the entry into force of an amendmentto an Annex to the Convention, a Party may notify the Secretary-General of the Organization that its express approval will be necessarybefore the amendment enters into force for it. The latter shall bringsuch notification and the date of its receipt to the notice of Parties.19

Article 16(2)(f)(iii) further provides:

An amendment to an Appendix to an Annex to the Convention shall bedeemed to have been accepted at the end of a period to be determinedby the appropriate body at the end of its adoption, which period shall benot less than ten months, unless within that period, an objection iscommunicated to the Organization by not less than one-third of theParties or by the Parties the combined merchant fleets of whichconstitute not less than fifty percent of the gross tonnage of the world'smechant fleet whichever condition is fulfilled. 20

Under the method of tacit acceptance, an amendment is deemed tohave been accepted on a specified date unless, at a prior date, it has beenrejected by a certain number or percentage of Contracting Parties. Thismethod raises two problems. The first is the setting of the deadline forthe communication of rejections; the second is that of defining theblocking minority. Other issues which arose in the development of thetacit acceptance method were the possibility of contracting-out and thelegal position of objecting parties. The essence of contracting-out is toavoid legal obligations which would otherwise result. The possibility ofcontracting-out was seen to contain both advantages and drawbacks. Onone hand, it might make the procedure more acceptable; on the other, itcould encourage governments to use contracting-out as a tool ofcompetitive advantage.2' One of the attributes of the tacit acceptancemethod is that it makes it very difficult for governments to adopt a policy

19See MARPOL 7378, supra note 2, at art. 16(2)(f)(ii).20Id.21Each individual state can contract out, which is not the case for tacit acceptance; the latter

requires the collective action of a minimum number of states. Furthermore, contracting-out canbe considered to be an active procedure, while tacit acceptance is passive and requires noaction. The first is intended to avoid legal obligations, while the second presumes an assumptionof such obligations.

Vol. 25, No. I


of wait and see, i.e., to observe how other governments act and to reactaccordingly within the fixed period.

The accelerated amendment procedures thus introduced two sig-nificant elements: the preparation and adoption of amendmentswithin the Organization by one of its organs, and the concept of tacitacceptance which makes decisions automatically binding unless anotification of a state's intention not to be bound is received beforethe amendment enters into force.

III.EVOLUTION OF NEW INTERNATIONAL

ENVIRONMENTAL REGULATORY REGIME

There is no doubt that marine pollution must be viewed as anintegral part of developing international law. Before the IMO'sConvention entered into force on March 17, 1958, the first substantialstep taken towards an international solution to oil discharges was the1954 Convention on the Prevention of Pollution of the Sea by Oil.22

A. The 1954 International Convention for the Prevention ofPollution of the Sea by Oil

The 1954 Convention was concluded at a Conference held inLondon in 1954. All the proposals presented at the meeting implicitlyrecognized the practical impossibility of prohibiting all discharges ofoily waste, and the resulting Convention was generally generous toshipping interests. When more than fifty miles from shore, tankerswere free to dispose of oil without restriction, but within the fifty-mileprohibition zone, only discharges with an oil content of less than 100parts per million were allowed. 23 Even these modest provisions,however, were relatively meaningless due to the 1954 Convention'scomplete dearth of a reliable compliance mechanism. 24 The 1954Convention did not adopt effective regulations preventing marinepollution. Although the regulations protected coastal zones fromimmediate discharges of oily ballast water and residues, they couldnot prevent pollutants from drifting into the designated prohibitedzones after a legal discharge at sea. In view of these shortcomings, it

22 International Convention for the Prevention of Pollution of the Sea by Oil, 12 U.S.T. 2989,T.I.A.S. No. 4900, 327 U.N.T.S. 3 [hereinafter "the 1954 Convention"].23 1d. at art. III.

24 R. M'Gonigle & M. Zacher, Politics, Pollution and International Law: Tankers at Sea 219

(1979).

danuawy M14


is hard to dispute the observation of some scholars that the regulatorysystem established by the 1954 Convention was notable only for itsinadequacy.25

During this period, the IMO began to play an increasing role in theregulation of ocean pollution. 26 In 1959, the IMO Secretariat calledfor a new conference to amend the 1954 Convention. 27 Numerousconferences at this time were discussing the Law of the Sea. In 1958,the Conference on the Law of the Sea was held in Geneva, producingthe Convention on the High Seas.28 Specific reference was made toexisting conventions concerning the oil discharge pollution prob-lem.29 These actions encouraged international recognition of anincreasing pollution problem caused by oil tankers on the high seas.Because of the lack of progress in pollution control under existinginternational law, the Intergovernmental Maritime Consultative Or-ganization 30 (IMCO) called a conference in 1962 to amend the 1954Convention. Although the 1962 amendments 31 sought to strengthensome of the provisions of the 1954 Convention, its effectivenessremained doubtful. The system was a sham.32

In March 1967, the tanker Torrey Canyon grounded off the south-west coast of England illustrating, for the first time, how the physicalevidence of a major shipping pollution disaster, with wide mediacoverage, can influence public policy. In every respect, whetherscientific, ecological or legal, the Torrey Canyon disaster caught themaritime world completely unprepared. Public concern, aroused bythe wide variety of problems caused by the wreck, resulted inrelatively rapid action by various governments as well as by severalinternational organizations. Suddenly, the anti-pollution campaignwas no longer only the focus of environmentally conscious individu-als and organizations, which had persuaded only a few governmentsto voice their concerns. The campaign was quickly taken over by alarge number of states which saw the dangers of a major oil spill totheir own vulnerable coastlines. Such states consisted not only of

BId.

26Juda, IMCO and the Regulation of Ocean Pollution From Ships, 26 Int'l & Comp. L.Q. 558(1977).

27M'Gonigle & Zacher, supra note 24, at 91.2Convention on the High Seas, April 29, 1958, 13 U.S.T. 2312, T.I.A.S. No. 5200, 450

U.N.T.S. 82.2l9 d. at art. 24.3°IMO Convention, supra note 6.311962 Amendments to the 1954 Convention, April 11, 1962, 17 U.S.T. 1523, T.I.A.S. No.

6109, 600 U.N.T.S. 332 [hereinafter "1962 Amendments"].32M'Gonigle & Zacher, supra note 24, at 222.

Vol. 25, No. 1


coastal states without shipping interests, but also shipping states withcoastal interests. 33

In 1968, the United Kingdom submitted amendments 34 to IMCOwhich would legitimize the already widespread use of the load-on-top-system. Under this system, the oily water mixture which wouldotherwise be discharged is put in a special tank on the vessel. Thewater and oil are then allowed to separate, and the water is drainedfrom the bottom. New cargo can then be loaded on top of the oilresidue. The 1969 Amendments adopted the load-on-top ("LOT")system. 35 In 1970, the United States, confronted with the domesticenvironmental movement, questioned the ability of LOT to curtail theoil discharge problem. Because of these doubts, the United Statesadvocated the use of segregated ballast tanks (SBTs) that would berestricted to ballast water. 36 Equally important was the passage of thePorts and Waterways Act in 1972 which permitted the United Statesto require SBTs in national waters. 37

Due to the United States initiative and a growing world-wideconcern for pollution, the International Conference on Marine Pollu-tion was convened in London on October 8, 1973. The Conferencesustained and strengthened the acceptable standards for new tankvessels. It is interesting to note that the international community alsoaddressed the seriousness of marine pollution from the civil liabilityperspective. Shortly after the Torrey Canyon disaster, the interna-tional maritime legal community embarked upon an effort to draw upa convention covering the limits and terms of liability for future casesof pollution damage. The work was undertaken largely by the newlycreated Legal Committee of the Intergovernmental Maritime Consul-tative Organization (now IMO). 38

33Gold, "The Control of Marine Pollution From Ships: Responsibilities and Rights,"presented to Panel IV of the 20th Annual Conference of the Law of the Sea Institute, MiamiBeach, July 22, 1986, printed in Marine Research Series No. 12 at 4 (1986).

These proposals coincided with the entry into force of the 1962 Amendments in May 1968.The United Kingdom advocated the use of the load-on-top-system.

351969 Amendments to the 1954 Convention, Oct. 21, 1969, 28 U.S.T. 1205, T.I.A.S. No.8505 [hereinafter "the 1969 Amendments"].

36Ironically, some states eventually supported SBTs in 1978 because a high percentage oftheir tanker fleet was laid up. The use of SBTs meant more tankers would be needed totransport the same amount of oil because SBTs reduced cargo space. See generally M'Gonigle& Zacher, supra note 24, at 133-36.

37 Pub. L. No. 92-340, Titles I and II, 86 Stat. 424 (1972) (amended 1978), 46 U.S.C. §§391-391(a) (1982).

38Mendelsohn, Maritime Liability for Oil Pollution-Domestic and International Law, 38 Geo.Wash. L. Rev. 1, 35 (1969).

January 1994


B. The International Convention for the Prevention of Pollutionfrom Ships

The primary convention that expressly addressed the problems ofvessel-generated pollution was the International Convention for thePrevention of Pollution from Ships. 39 Annex I of MARPOL 73regulates oil pollution and Annex II regulates pollution from noxiousliquid substances; both were to be compulsory with the ratification ofMARPOL 73. Annex I permits operational discharge as long as tankvessels are more than fifty nautical miles from land or are not in adesignated special area.40

Successful implementation of earlier discharge standards was ques-tionable because the LOT system depended upon the conscientiousapplication of tank vessel operators. In response, MARPOL 73sought to reduce the reliance on the human element 4' by requiring theuse of a discharge monitoring and control system (Regulation 15). Theproblem with Regulation 15, however, was that there were nocommercially viable monitoring systems in 1973. The most celebratedregulation in Annex I required segregated ballast tanks for all newtank vessels over 70,000 deadweight tons.42 Annex II governs a widevariety of chemicals and prescribes that ballast water, tank washingresidues or mixtures containing any noxious substances be dis-charged only at a reception facility unless the concentrations arediluted to acceptable levels. These tough concentration standards andthe corresponding need for reception facilities provided a stumblingblock to MARPOL 73's ratification. The fact that Annex II wascompulsory compounded the difficulties. 43

Although the work of IMCO and the member state delegations atthe 1973 Conference appeared competent, in reality, ratification ofthe Convention was slow and the opposition to MARPOL 73 wasstrong due to technological problems, economic considerations andthe mandatory nature of Annex II. The incentive to correct thesituation came again from the United States. A series of tank vesselaccidents in the United States renewed interest in the issue of oilpollution. The first of these accidents, involving the Argo Merchanton December 15, 1976, was followed in rapid succession by the

39MARPOL 73/78, supra note 2.401d.4 1D. Abecassis, Oil Pollution From Ships 57 (1978) [hereinafter "Abecassis"].42Curtis, Vessel-Source Oil Pollution and Marpol 73/78: An International Success Story?, 15

Envtl. L. 679 (1985).43M'Gonigle & Zacher, supra note 24.

Vol. 25, No. I


Oswego Peace on December 24, the Olympic Games on December 27and the Grand Zenith on December 29. Twelve other accidentsoccurred in late 1976 and early 1977. 44 In response, President JimmyCarter called for the adoption of domestic and international standardsto reduce operational and accidental oil pollution. He encouragedimmediate ratification of MARPOL 73 and advocated renewed effortstowards pollution regulation by the international community. 45

The Intergovernmental Maritime Consultative Organization, nowthe IMO, and the international community saw this as a demand forlegitimate progress to control vessel-source oil pollution. This pres-sure resulted in the Conference on Tanker Safety and PollutionPrevention in London in February 1978. The conference was con-vened to correct what by then were perceived as deficiencies inMARPOL 73 and the Safety of Life at Sea Convention. 46 ThisConference resulted in both procedural and substantive changes inMARPOL 73. One procedural change that facilitated early ratificationof the 1978 MARPOL Protocol was Article 1(2).4 7 The modificationallowed entry into force for Annex II to occur after entry into forcefor the articles and Annex I. Additionally, a two-thirds majority of theparties in the Marine Environment Protection Committee couldfurther extend the entry date for Annex 11. 48

C. Protocol of 1978 Relating to the International Convention forthe Prevention of Pollution from Ships

The 1978 Protocol implemented a more effective system for pre-vention of oil pollution. The United States advocated the use of SBTsin new and existing tankers which would eliminate the humanelement, allegedly the main problem with the LOT system.49 Afterintense negotiations, a new Regulation 13 emerged as a compro-mise.50 Although the drafters of MARPOL 73/78 were enthusiastic

44Curtis, supra note 42, at 698.45123 Cong. Rec. 7931 (Mar. 17, 1977) containing statement of President Jimmy Carter.46Intemational Convention for the Safety of Life at Sea, Nov. 1, 1974, T.I.A.S. No. 9700.47MARPOL 73/78, supra note 2, at art. 1(2). This article provides that the 1978 Protocol and

MARPOL 73 shall be read and interpreted together as one instrument. A state thereforebecomes a party to the 1973 Convention as modified by the 1978 Protocol.

48Id.49For a discussion of the political aspects of the SBTs debate, see M'Gonigle & Zacher,

supra note 24, at 130-41.5ORegulation 13 provides that all new oil tankers of 20,000 deadweight tons and new product

tankers of 30,000 deadweight tons be equipped with SBTs and use crude oil washing (COW) asa cargo tank cleaning system. Regulation 13(B)(3) requires inert gas systems in each cargo andslop tank, a response to the potential for tank explosions.

January 1994


about the regulations, the structural and operational requirementsplaced a heavy economic burden on a private industry that wasexperiencing price cutbacks and higher percentages of tanker inac-tivity. In a major step towards international acceptance of the newstandards, President Carter signed the Act to Prevent Pollution fromShips on October 21, 1980, implementing MARPOL 73/78 well beforeits entry into force.51 In October 1982, the requirements of Article V52

were met when Greece and Italy accepted MARPOL 73/78 whichmeant an entry into force in October 1983. 53

The success of MARPOL 73/78 depends, first, on the substantiveprovisions of the agreement regarding compliance and, second, onthe efforts taken by the international community to enforce thoseprovisions. A legitimate concern is the ability of the current interna-tional legal system to implement and monitor environmental protec-tion laws. Treaty obligations that encroach upon the customary law offreedom of the high seas are difficult to enact and enforce. In practice,close verification of a ship's activity on the high seas is impossibleand compliance depends largely upon the integrity of the ship'soperators.

Article I demands that contracting parties undertake to give effectto the provisions of MARPOL 73/78.54 Parties are obligated tocooperate in the detection of violations and the enforcement ofpertinent provisions. 55 The flag state's duty to initiate proceedings foran alleged violation is established in Article 4 of MARPOL 73/78.56

Under Article 6(5) of MARPOL 73/78, a port state may inspect a shipwithin its jurisdiction if sufficient evidence exists that a violation hasoccurred any place. However, the report of such investigation carriedout by a port state shall be sent to the party requesting it or to the flagstate so that the appropriate action can be taken. Effective enforce-ment depends upon compliance certificates and inspection require-ments. MARPOL 73/78 now requires periodic and intermediatesurveys. If a port state is aware of a ship in port which fails to meetequipment standards, that port state shall take such steps as willinsure that the ship shall not sail until it can proceed without

51Act for the Prevention of Pollution from Ships, 33 U.S.C. § 1901 (1982).5 2Art. V of the 1978 MAPROL Protocol states that the present Protocol shall enter into force

twelve months after the date on which not less than fifteen states, the combined merchant fleetsof which constitute not less than fifty percent of the gross tonnage of the world's merchantshipping, have become parties.

53 1nt'l. Env't. Rep. (BNA) 432 (Oct. 13, 1982).54MARPOL 73/78, supra note 2, at art. 1.55Id.56Id. at art. 4.

Vol. 26, No. I

OPA '90. and MARPOL 73/78

presenting an unreasonable threat of harm to the marine environ-ment.57

MARPOL 73/78 does not provide that a port state may instituteproceedings for violations outside its territorial waters. The enforce-ment method imposes a duty on the port state to inspect a ship if clearevidence of a violation exists. Even then, evidence is turned over tothe flag state to initiate action.58

D. Vessel Source Pollution under Law of the Sea Convention

Article 211 of the Law of the Sea Convention, 1982, requires states,acting through the competent international organization or generaldiplomatic conferences, to establish international rules and standardsgoverning vessel-source pollution, including the adoption of routingsystems designed to avoid collisions at sea.59 Under the Law of theSea Convention, differing types of regulatory jurisdictions are ac-corded to flag states and to coastal states with respect to vesselswithin their ports, within their territorial seas, and within theirexclusive economic zones. o

Flag states are obligated to adopt laws and regulations for theprevention of pollution of the marine environment from vessels flyingtheir flags or of their registries, which measures must be at least aseffective as generally accepted international standards. In particular,flag states must regulate the design, construction, equipment, opera-tion and manning of vessels, and they must take measures forpreventing accidents (including the designation of routing systems),dealing with emergencies, ensuring the safety of operations at sea andpreventing both intentional and unintentional discharges.6' The flagstate has the primary responsibility for ensuring that its ships complywith international rules and standards and those of the flag state. 62

Coastal states may adopt laws and regulations for the prevention,reduction and control of marine pollution from foreign vessels withintheir territorial seas, including vessels exercising the right of innocentpassage. However, such measures may not impede innocent passage. 63

51Id. at art. 5.581d. at art. 6(5).5 9Article 211 of the United Nations Convention on the Law of the Sea, Dec. 10, 1982, U.N.

Doc. A/Conf. 62/122 (1982), reprinted in 211 I.L.M, 1261 (1982).6°Id. at art. 211(3).6 11d. at arts. 194(3)(b) and 211.621d. at art. 217.631d. at art. 211(4).

January 1994


States may establish standards for pollution prevention as a conditionfor entrance into their ports or internal waters or for a call at theiroff-shore terminals but must publicize such requirements, both directlyand through the competent international organization. Where a coastalstate believes that international rules and standards are inadequate toprotect an area of its exclusive economic zone, the coastal state maysubmit a request to the competent international organization for adetermination that special conditions exist which merit additionalcoastal state regulation of vessel-source pollution in that area. Upon afinding that special conditions exist, the coastal state may adopt lawsand regulations for the area, which may relate to discharges or naviga-tional practices, but which may not relate to design, construction,manning or equipment standards, other than generally accepted inter-national standards. 64

E. The Mandate of IMO in Light of the 1982 United NationsConvention on the Law of the Sea

In many of its articles, the Law of the Sea Convention refers to"competent international organization" and to "generally acceptedinternational rules and standards." The negotiations which led to theadoption of the Law of the Sea Convention clearly indicate that theIMO was contemplated whenever the term "competent internationalorganization" was used in the singular and reference was being madesimultaneously to standards relating to the safety of navigation andthe control and prevention of the marine environment.65 The terms"applicable international rules and standards" or "generally ac-cepted international rules and standards" are to be found in manyarticles of the Law of the Sea Convention.66 It can therefore be said

64Id. at art. 211(6).65Van Reenen, Rules of Reference in the New Convention on the Law of the Sea, in

Particular in Connection with the Pollution of the Sea by Oil from Tankers, NetherlandsYearbook of International Law 3, 9 (1981). Other organizations are sometimes addressed aswell, UNEP for instance. See also Popp, Recent Developments in Tanker Control inInternational Law, Canadian Yearbook of International Law 3, 11 (1980). (The author statesthat "the emphasis in this provision and others on adoption of rules and standards by thecompetent international organization will emphasize the important role that the Inter-Govern-mental Maritime Consultative Organization (IMCO) has to play in this area. It may provideIMCO with a mandate which, in the realm of environmental marine protection, has not alwaysbeen entirely clear.").

66See, e.g., Article 218(I), which provides:When a vessel is voluntarily within a port or at an off-shore terminal of a State, that Statemay undertake investigations and, where the evidence so warrants, institute proceedingsin respect of any discharge from that vessel outside the internal waters, territorial sea or

Vol. 25, No. 1


that the Law of the Sea Convention gives special recognition to IMOas the organization entrusted with the adoption of standards relatingto safety at sea and the control and prevention of marine pollution. Itacknowledges the standards adopted by IMO.

The practice of states, supported by the broad consensus achievedat the Third United Nations Conference on the Law of the Sea, haseffectively established as customary law the concept of the exclusiveeconomic zone and the basic rules governing it. These are binding,therefore, on states generally even before the Law of the SeaConvention comes into effect and thereafter even as to states notparty to the Convention. In those respects, the Convention is anauthoritative statement of customary international law.6 7

IV.DEVELOPMENT OF OPA '90

Prior to OPA '90, four major federal statutes provided for oilpollution liability and compensation: Section 311 of the FederalWater Pollution Control Act (commonly known as the Clean WaterAct (CWA)),68 the Deep-Water Port Act (DWPA),69 the Outer Con-tinental Shelf Lands Act Amendments (OCSLAA),70 and the TransAlaska Pipeline Authorization Act (TAPAA). 7 1 Each applies tovarious geographic regions and activities and contains differingfunding, liability, and administrative provisions. Section 311 of the

exclusive economic zone of that State in violation of applicable international rules andstandards established through the competent international organization or general diplo-matic conference.67See Restatement (Third), supra note 3, at § 514 and comment a.68Federal Water Pollution Control Act Amendments of 1972, Pub. L. No. 92-500, 85 Stat.

816 (codified as amended at 33 U.S.C. §§ 1251-1387 (1988) [hereinafter "the Clean Water Act"].The Clean Water Act had its origin in the Federal Water Pollution Control Act of 1948, 62 Stat.1155. Section 311 relating to oil and hazardous substance spills, generally originated in theWater Quality Improvement Act of 1970, Pub. L. No. 91-224, 84 Stat. 91, but may also havehad some faint beginnings in the Oil Pollution Act of 1924, ch. 316, 43 Stat. 604, the Oil PollutionAct of 1961, Pub. L. No. 87-167, 75 Stat. 402, and the Oil Pollution Act Amendments of 1973,Pub. L. No. 93-119, 87 Stat. 424. See Rodgers, 2 Environmental Law: Air and Water §§4.35-4.37 (1986) (contains an extensive legislative history and analysis of CWA § 311 and otherlaws addressing oil pollution).

6Pub. L. No. 93-627, 88 Stat. 2126 (1974) (codified as amended at 33 U.S.C. §§ 1501-24(1988)).

"°Pub. L. No. 95-372, 92 Stat. 674 (1978) (codified at 43 U.S.C. §§ 1811-66 (1988)). For asummary of OCSLAA, see Bagwell, Liability Under United States Law for Spills of Oil orChemicals from Vessels, Lloyd's Mar. & Com. L.Q. 513-15 (1987).71Pub. L. No. 93-153, 87 Stat. 589 (1973), (codified at 43 U.S.C. §§ 1651-55 (1988)). For asummary of TAPAA, see Bagwell, supra note 70, at 515-17.

Januwy I W4


Clean Water Act has the broadest scope, covering tankers and inlandbarges, and applies to spills upon inland navigable waters, theterritorial sea, the contiguous zone and the exclusive economiczone.72

Since 1975, many unsuccessful attempts had been made to stream-line United States oil pollution law. The oil spill resulting from thegrounding of the Exxon Valdez in Prince William Sound, Alaska, onMarch 24, 1989, followed by other high profile oil spills, including theAmerican Trader incident in California, the Mega Borg explosion andfire in the Gulf of Mexico and several spills in New York Harbor,catalyzed the enactment of new, far-reaching legislation. 73

Congress responded with an unprecedented flurry of oil spillhearings and proposals subsequent to the Exxon Valdez incident. Oneof the most significant responses was the reintroduction of S.686, theSenate's comprehensive companion Bill to H.R. 1465, which hadbeen before committees of the House since the opening days of the101st Congress. 74 Senator George Mitchell orchestrated this timelydevelopment less than two weeks after the Exxon Valdez's spill. 75

S.686 and H.R. 1465 then began to move, picking up significantamendments and support along the way. The Administration alsoresponded with its own proposal.76 OPA '90's voyage through thelegislative process ended fittingly in Maine, the state where anunlimited liability regime and certain elected officials had playedintegral roles throughout the bill's development.77 This time, how-ever, the drama unfolded not in the state legislature or in SenatorMitchell's district office, but in Kennebunkport, the site of PresidentBush's summer home. With scant media coverage, the Presidentsigned OPA '90 into law on August 18, 1990.78

7233 U.S.C. § 1321(a)-(b) (1988).7Uda, The Oil Pollution Act of 1990: Is There a Bright Future Beyond Valdez?, 10 Va.

Envtl. L.J. 403 (1991).74S.686, 101st Cong., 1st Sess. (1989) introduced by Sen. George Mitchell on Apr. 4, 1989.

The House passed H.R. 1465 on Nov. 9, 1989, falling just five votes short of unanimouspassage. The final tally of votes was 375 to 5. See 135 Cong. Rec. H7892-98 (Nov. 1, 1989),H7954-75 (Nov. 2, 1989), H8120-67 (Nov. 8, 1989), H8241-8288 (Nov. 9, 1989).

75See "Mitchell Scores Bush's Decision Against U.S. Takeover of Oil Spill," Wash. Times,Apr. 5, 1989, at AS.

76See S.1066, 101st Cong., 1st Sess. (1989) (introduced by Sen. Chafee by request); H.R.2325, 101st Cong., 1st Sess. (1989) (introduced by Rep. Davis by request).

77Sen. Mitchell played a dominant role as Senate Majority Leader, as a member of theSenate Environment and Public Works Committee, and as a primary sponsor of S.686.

78President's statement on signing H.R. 1465, the Oil Pollution Act of 1990, 26 WeeklyComp. Pres. Doc. 1265-66 (Aug. 27, 1990).

Vol. 25, No. 1


A. Double Hull Requirement

OPA '90 contains safety requirements as well as liability provi-sions. It requires that all new vessels constructed for the carriage ofoil shall be equipped with double hulls when operating in UnitedStates waters or the United States exclusive economic zone. 79 Withregard to existing vessels, the double hull requirement is phased inover a period of years, starting in 1995, depending upon the age andsize of the tank vessel.8 0 By the year 2010, all vessels over 5,000 grosstons must have double hulls, except that those which currently havedouble bottoms or double sides may continue operating in UnitedStates waters until 2015.81 The year 2015 is also the date by whichvessels unloading oil at a deep water port or off loading in lighteringoperations more than 60 miles from the coast must have double hullconstruction.8 2 Double hull construction places a second steel barrierbetween vessel cargoes and the environment. The second, or innerhull, will be located sufficiently inboard so that the probability of itsrupture during a low-energy collision or grounding is relatively lowcompared to that of a single hull.

OPA '90 substantially alters and increases the pollution liabilitiesimposed on those engaged in the exploration, production, and trans-portation of oil within the territorial seas and the exclusive economiczone83 of the United States in the event of the discharge of oil. Itimposes liability for oil spills in the navigable waters, exclusiveeconomic zone, or shorelines of the United States on the owner,operator, or demise charterer of a vessel as the responsible party inthe event of an oil spill.84 The Act requires the responsible party topay all removal costs including the costs to prevent, minimize ormitigate oil pollution in any case in which there is a substantial threatof, or an actual discharge of oil.85 The responsible party must payremoval costs incurred by the United States, a state government, oran Indian tribe pursuant to the Clean Water Act,86 the Intervention on

79OPA '90, supra note 4, at § 4115 (adding new § 3703(a) to 46 U.S.C.).MId. at § 4115(a) (codified at 46 U.S.C. § 3703a(c)(3)).811d .

82id.83See supra notes 3 and 4 for a definition of the exclusive economic zone and coverage of

OPA '90 respectively.8OPA '90, supra note 4. With respect to an offshore facility, the responsible party is the

lessee or permittee of the area in which the facility is located or the holder of a right of use andeasement granted under state law or the Outer Continental Shelf Lands Act.

85Id. at §§ 1001(31), 1002(a).8633 U.S.C. §§ 1251-1387 (1988).

January 1994


the High Seas Act,87 or state law, as well as removal costs incurred byany person for acts consistent with the National Contingency Plan.88

In addition to removal costs, the responsible party shall be liable fordamages for injury to natural resources,8 9 injury to real or personalproperty, including economic losses resulting from that injury, loss ofsubsistence use of natural resources, loss of revenues (includingfederal, state or local taxes) on the use of natural resources and realor personal property, loss of profits and impairment of earningcapacity resulting from such pollution, and the costs of providingadditional public services during or after removal activities. 90

After OPA '90 was signed into law, the United States proposed tothe International Maritime Organization (IMO)91 that Annex I of theInternational Convention for the Prevention of Pollution from Ships1973 and the Protocol of 1978 relating thereto (MARPOL 73/78) beamended to apply the double hull construction standard to new tankvessels in line with provisions found in OPA '90.92

V.DEVELOPMENT OF REGULATIONS 13F AND 13G

Under the Convention on the International Maritime Organiza-tion,93 the Marine Environment Protection Committee is the organresponsible for considering any matter within the scope of theOrganization concerned with the prevention and control of marinepollution from ships. It is the organ responsible for performing suchfunctions as are or may be conferred upon the Organization by orunder international conventions for the prevention and control ofmarine pollution from ships, particularly with respect to the adoptionand amendment of regulations or other provisions, as provided for insuch conventions.

Under Article 16 of MARPOL 73/78, an amendment proposed by aparty to MARPOL shall be submitted to the International MaritimeOrganization and circulated by its Secretary-General to all membersof the International Maritime Organization and all parties at least six

8733 U.S.C. §§ 1471-87 (1988).88OPA '90, supra note 4, at § 1002(b)(1)."Id. at § 1006.9°Id. at § 1002(b)(2).9 1The U.S. proposed to the appropriate body of the IMO because, by virtue of Art. 19 of

MARPOL 73/78, the Convention is deposited with the Secretary-General of the IMO.92OPA '90, supra note 4, at § 4115.931MO Convention, supra note 6, at art. 39(a).

Vol. 25, No. I


months prior to its consideration. 9 4 Any amendment proposed andcirculated shall be submitted to the appropriate body by the organi-zation for consideration. 95 The appropriate body to consider theproposed amendment is IMO's Marine Environment Protection Com-mittee.9 6 The procedure contemplated for use in adopting the pro-posed amendment is the tacit amendment procedure.97 A party maynotify IMO that its express approval will be necessary before theamendment enters into force for that party.98

In July 1991, the MEPC approved a draft regulation designed toimpose new construction standards on new tank vessels. DraftRegulation 13F contained requirements for double hull standards and,in the alternative, a construction standard involving double sides anda horizontal deck separating upper and lower cargo tanks (mid-deck).99 The draft Regulation also provided for acceptance of otherconstruction standards to be considered and approved in the future inaccordance with guidelines developed by IMO. 100 The standards areto be applied according to dates calculated on the basis of buildingcontracts, keel laying, delivery or major conversion. 10 The IMOconducted a major study into the comparative performances of thedouble hull and mid-height deck tank vessel designs with fundingfrom the oil and tanker industries and concluded in January 1992 thatthe two designs could be considered as equivalent, although eachgives better or worse outflow performance under certain condi-tions. 10 2

On March 6, 1992, important changes to the design and construc-tion of new and existing oil tankers were agreed by 250 representa-

9MARPOL 73/78, supra note 2, at art. 16(2)(a).9id. at art. 16(2)(b).9IMO Convention, supra note 6, at art. 12, stating that the Marine Environment Protection

Committee [hereinafter "MEPC"] is one of the organs of the IMO.97MARPOL 73/78, supra note 2, at art. 16, which describes the tacit amendment procedure.1Id. at art. 16(2)(f)(ii).99IMO Briefing Papers on Comparative Study, July 10, 1991.1001d.I'Id.

102IMO Briefing Papers, Jan. 16, 1992. These papers conclude that mid-deck and double hullsgive equivalent protection. See also MEPC 31/Prevention of Oil Pollution (in response toResolution A.675 (16)), where the United States delegation reserved its position on the lowerlimit of application of 600 dwt, since, in its view, it should be applicable to all tank vessels. Inaddition, the United States reserved its position on the dimensions of double hull tank vesselsless than 5,000 dwt as outlined in paragraph (3)(a)(ii) of Regulation 13F, and the arrangement ofprotective tanks for vessels below 300 dwt outlined in paragraph (7) of Regulation 13F. Further,the United States delegation reserved its position on paragraph (4) of Regulation 13F relating tomid-deck oil tankers. The United States also reserved its position on Regulation 13G regardingexisting oil tankers.

January IM9


tives of 51 countries meeting at the headquarters of the InternationalMaritime Organization, the United Nations Agency 10 3 concernedwith shipping, safety and the prevention of marine pollution. The32nd session of IMO's Marine Environment Protection Committee(MEPC 32) adopted Regulations 13F and 13G to Annex I zofMARPOL 73/78, which is concerned with regulating oil pollution.104Regulation 13F deals with new tank vessels of 600 deadweight tonsand above. These are tank vessels for which the building contract isplaced after July 6, 1993, the keels of which are laid on or afterJanuary 6, 1994; or which are delivered on or after July 6, 1996.105

Tank vessels of 5,000 deadweight tons and above must be fittedwith double bottoms and wing tanks extending the full depth of theship's sides. 106 The regulation allows mid-deck height tank vesselswith double sides as an alternative to double hull construction. Othermethods of design and construction may also be accepted providedthat they ensure the same level of protection against pollution in theevent of a collision or stranding. The design methods must beapproved-by the MEPC based on guidelines which are to be devel-oped by IMO. Oil tankers of 600 deadweight tons and above but lessthan 5,000 deadweight tons must be fitted with double bottom tanksand the capacity of each cargo tank is limited to 700 cubic meters,unless they are fitted with double hulls.

Regulation 13G establishes a phaseout schedule which begins onJuly 6, 1995, for existing single hulled tank vessels to be removedfrom service or converted into a double hull or mid-deck configura-tion. Regulation 13G is applicable to existing crude oil carriers of20,000 deadweight tons or over, or product carriers of 30,000deadweight tons or over.1 07 It makes provision for an enhancedprogram of inspections to be implemented, particularly for tankvessels which are more than five years old. 10 8 Regulation 13G allows

10 31MO Convention, supra note.6, at art. 59, which provides:The Organization shall be brought into relationship with the United Nations in accordancewith Article 57 of the Charter of the United Nations as the specialized agency in the fieldof shipping and the effect of shipping on the marine environment. This relationship shallbe effected through an agreement with the United Nations under Article 63 of the charterof the United Nations, which agreement shall be concluded as provided in Article 25.1°4Amendments to the Annex of the Protocol of 1978 Relating to the International

Convention for the Prevention of Pollution of Ships, 1973, adopted by Resolution 52(32) of theMarine Environment Protection Committee, Mar. 6, 1992 [hereinafter "the Mar. 6, 1992Amendments to MARPOL 73178"].

1051d.0Id.

107Id.1O8Id.

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for future acceptance of other structural or operational arrange-ments such as hydrostatic balance as alternatives to the protectivemeasures spelled out in the Regulation. 109 It is anticipated that manyolder tank vessels which cannot be brought up to the new standardeconomically will be scrapped, and the MEPC recognized thispossibility by adopting a resolution on the development of shipscrapping capacity to ensure the smooth implementation of theamendments. 110 The resolution recommends that member govern-ments take initiatives, in cooperation with the shipbuilding andshipping industries, to develop scrapping facilities at a world-widelevel, to promote research and development programs and toprovide technical assistance to developing countries in developingship scrapping facilities.111

On December 23, 1992, the U.S. Embassy in London deposited adeclaration with IMO stating that the express approval of the U.S.Government will be necessary before Regulations 13F and 13G ofMARPOL 73/78 would enter into force for the U.S. In this declara-tion, the U.S. cited the technical differences between MARPOLamendments for new and existing tankers and the mandated require-ments of OPA '90.112

Pursuant to OPA '90, the Coast Guard published an Interim FinalRule (IFR).113 The IFR established technical standards for doublehulls on vessels carrying oil in bulk, as cargo or cargo residue, thatare constructed or undergo a major conversion under contractsawarded after June 30, 1990.114 The IFR also included a phase-outschedule for existing single hulled tank vessels." 5

The MARPOL 73/78 Convention has been ratified by 70 countrieswhose fleets comprise about 90% of the world merchant marine. Inpractice, virtually every tank vessel operating today complies withMARPOL 73/78. These amendments will have a major impact uponthe tank vessel market. The amendments entered into force underMARPOL's tacit acceptance procedure. The amendments could havebeen blocked only if rejected by one-third or more of the contracting

'09Id.1od.

I Id." 2Double Hull Standards for Vessels Carrying Oil in Bulk; U.S. Position on International

Standards for Tank Vessel Design, 58 Fed. Reg. 39087, July 21, 1993.113Double Hull Standards for Vessels Carrying Oil in Bulk; 57 Fed. Reg. 36222, Aug. 12,

1992; 57 Fed. Reg. 60402, Dec. 18, 1992.141d.

115id.

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parties, or by parties whose fleets form 50% or more of worldmerchant shipping tonnage. 1 6

The new Regulation 13F for new tank vessels differs significantlyfrom OPA '90's standards. OPA '90 requires all new tank vesselsconstructed for the carriage of oil to be equipped with a double hullwhen operating in United States waters or the United Statesexclusive economic zone," 7 while Regulation 13F allows for tankvessels, 5,000 deadweight tons and above (a mid-deck heightstandard) to be fitted with double-sided hulls. Regulation 13F alsopermits other methods of design and construction to be acceptedprovided that they ensure the same level of protection againstpollution in the event of a collision or stranding. 1 8 What thenhappens if a double-sided hull tank vessel belonging to a MARPOL73/78 state party seeks to enter the United States' navigable waters?What happens if the United Sates Coast Guard denies it entry?Alternatively, would allowing entry violate OPA '90? As men-tioned earlier, the thrust of this article is to seek answers to suchquestions. In providing answers to these questions, one has toexamine the United States' approach to regulation of vessel designstandards.

VI.THE UNITED STATES' APPROACH TO REGULATION OF

VESSEL DESIGN STANDARDS

The Tank Vessel Act of 1936 was substantially revised by the Portand Waterways Safety Act of 1972.119 The 1936 legislation, whilebroad in the scope of its coverage, related to protection of life andproperty without specific reference to environmental protection. Itwas the intent of Congress in revising the 1936 Act to emphasize itsconcern with the environment. 20

After 1972, maritime traffic in United States waters continued toexpand, maritime casualties continued to occur and the incidence ofpollution damage increased. In 1972, approximately 35 tankers per

116MARPOL 73/78, supra note 2.117OPA '90, supra note 4. See 46 U.S.C. § 3703(a).I 8rTlhe Mar. 6, 1992 Amendment to MARPOL 73/78, supra note 104."19 Formerly 46 U.S.C. § 391(a). A partial recodification of Title 46 of the United States Code,

P.L. 98-89, was enacted on August 23, 1983. The provisions of the Tank Vessel Act, formerly46 U.S.C. § 391(a), have been moved to several recodified sections of Title 46. The principalprovisions are now contained in 46 U.S.C. §§ 3701-18, which is Chapter 37 - Carriage of LiquidBulk Dangerous Cargoes.

120S. Rep. No. 92-724, reported in 1972 U.S. Code Cong. & Admin. News 2781.

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day entered United States ports. Continued growth in United Statesimportation of foreign oil, if not for immediate use, for implemen-tation of the Government's strategic petroleum reserve program,continued to concern Congress as to the effectiveness of its pollu-tion prevention legislation.12 1 The 1978 amendments to the TankVessel Act prescribed certain minimum standards for tank vesselswhich were consistent with the standards adopted at the 1978Conference on Tanker Safety and Pollution Prevention. 122 While the1978 amendments were not meant to implement any internationalagreement, and were deemed to represent the independent evalua-tion of Congress as to standards for vessels operating in UnitedStates waters, the Congressional Committee adopted the TSPP'sinternational standards to the extent it was concluded as feasible. 123

Since the 1978 amendments to the Tanker Vessel Act presaged theratification of MARPOL 73/78, the Act to Prevent Pollution fromShips may be considered as remedial legislation to implement thoseaspects of MARPOL 73/78 which had not previously been imple-mented by the 1978 Amendments. The two Acts may thus be seen ascomplementary with the intention of giving MARPOL 73/78 fulldomestic effect.1 24

VII.JUDICIALLY CREATED DOCTRINES

Resolution of the inconsistencies between OPA '90 and MARPOL73/78 will be influenced by judicially created doctrines concerning theinterpretation of treaties and cases where such doctrines have beenapplied.

A. Last in Time Doctrine

The issue of priority of application where a treaty and a subsequentstatute conflict has been resolved by the adoption of what is known asthe last in time doctrine. This theory derives from the fact that thesupremacy clause, by its wording, affords equal weight to both

12 1H.R. Rep. No. 95-1304, reported in 1978 U.S. Code Cong. & Admin. News 3274.1221nternational Conference on Tanker Safety and Pollution Prevention, Feb. 6-17, 1978

[hereinafter "TSPP"].123See H.R. Rep. No. 95-1384, at 3289-90.124Abecassis, supra note 41, at 455. See also Port Safety and Tank Vessel Safety Act of 1978,

P.L. 85-474, codified as 33 U.S.C. §§ 1228-1232, and Act to Prevent Pollution frm Ships, supra note51.

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treaties and federal statutes.125 As the Supreme Court stated inWhitney v. Robertson:

Congress may modify such provisions so far as they bind the UnitedStates or supersede them altogether. By the Constitution, a treaty isplaced on the same footing, and made of like obligation, with an act oflegislation. Both are declared by that instrument to be supreme law ofthe land, no superior efficacy is given to either over the other. When thetwo relate to the same subject, the courts will always endeavor toconstrue them so as to give effect to both, if that can be done withoutviolating the language of either; but if the two are inconsistent, the onelast in time will control the other. 126

Thus, the Court provided what is essentially a two part test for theapplicability of this doctrine. The first part requires that the judiciarydetermine whether a conflict actually exists when the two provisionsare read in their most consistent light. Only if the two cannot bereconciled should the court apply the last in time doctrine. A furtherrequirement which has been imposed by the Court is that the treatymust be self-executing. This was rationalized by the court in ChaeChan Ping v. United States127 (The Chinese Exclusion Case):

A treaty, it is true, is in its nature a contract between nations and isoften merely promissory in its character, requiring legislation to carryits stipulations into effect. Such legislation will be open to future repealor amendment. If the treaty operates by its own force and relates to asubject within the power of Congress, it can be deemed in thatparticular only the equivalent of legislative act, to be repealed ormodified at the pleasure of Congress. In either case, the last expressionof the sovereign will must control. 128

Clarification of the factors to be used in determining whether atreaty is self-executing has been provided by the Seventh Circuit inFrolova v. Union of Soviet Socialist Republics.129 Factors to be consid-ered in determining the intent of the parties to the treaty include thelanguage and purpose of the agreement as a whole, the circumstances

125U.S. Const. art. VI. Art. VI states in pertinent part:

This Constitution, and the Laws of the United States which shall be made in Pursuancethereof; and all Treaties made, or which shall be made, under the Authority of the UnitedStates, shall be the supreme law of the Land; and the Judges in every State shall be boundthereby, any Thing in the Constitution or Laws of any State to the Contrary notwith-standing.126124 U.S. 190, 194 (1888).127130 U.S. 581 (1889).12id. at 600.129761 F.2d 370, 373 (7th Cir. 1985).

VOL. 25, No. 1


surrounding its execution, the nature of the obligations imposed by theagreement, the availability and feasibility of enforcement mechanisms,the implications of permitting a private right of action and the capacityof the judiciary to resolve the dispute. 30 Moreover, it has been held thatwhere the intent of the parties is clear from the language of the treaty,the reviewing court need not consider additional factors.131

Section 115 of the Restatement (Third) 32 provides that an Act ofCongress supersedes an earlier rule of international law or a provision ofan international agreement as law of the United States if the purpose ofthe Act is to supersede the earlier rule. Section 115 further provides thatif a rule of international law or a provision of an international agreementis superseded by domestic law, it does not relieve the United States ofits international obligation or of the consequences of that obligation.133Section 115(2) provides that a provision of a treaty of the United Statesthat becomes effective as law of the United States supersedes asdomestic law any inconsistent pre-existing provision of a law or treaty ofthe United States. 134 Section 321 provides that every internationalagreement in force is binding upon the parties to it and must beperformed by them in good faith. 35

B. Canons of Statutory Interpretation

A case involving the extraterritorial application of public legislationraises issues of legislative intent and reasonableness. Two canons ofstatutory interpretation guide the decisions to apply U.S. legislationextraterritorially. The first requires courts to determine whetherCongress intended the statute to have extraterritorial effect. 36 Theextent to which courts require legislative intent to be clearly articu-lated, however, usually depends upon their own judgments about the

130See also Tel Oren v. Libyan Arab Republic, 726 F.2d 774, 808-10 (D.C. Cir. 1984), cert.denied, 470 U.S. 1003 (1985).

131Cardenas v. Smith, 733 F.2d 909, 918 (D.C. Cir. 1984).132Restatement (Third), supra note 3, at § 115.133

1d. at § 115(l)(b).

1341d. at § 115(2).1351d. at § 321 and comment a, which provides that the doctrine of pacta sunt servanda lies

at the core of the law of international agreements and is perhaps the most important principleof international law. It includes the implication that international obligations survive restrictionsimposed by domestic law.

136Absent a finding of legislative intent to the contrary, courts presume that Congress meantfor legislation to govern only activities carried out in U.S. territory. See Foley Bros. v. Filardo,336 U.S. 281,285 (1949); see also G. Born & D. Westin, International Civil Litigation In UnitedStates Courts 434 (1989).

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desirability of giving the law extraterritorial effect. 137 If courts findcongressional intent, they then determine whether the extraterritorialapplication of the law in a particular case would violate norms ofinternational comity.138 To make this determination, courts inquirewhether the United States has the power to legislate over thedefendant 39 and whether the exercise of legislative power would bereasonable. 140

In fact, the reasonableness constraint is defined in the same manneras the choice of law rule found in the Restatement (Second) ofConflict of Laws that balances states' relative interests in a particularsuit.' 4' Here, as with the Restatement (Second) of Conflict of Laws,courts have yet to develop criteria specifically suited to balance theparticular interests implicated by extraterritorial environmental reg-ulations. 42 Thus, identifying the costs and benefits specific to envi-

137For example, despite similarly worded legislative materials, courts have determined thatCongress intended the antifraud provisions of the Securities Exchange Act, 15 U.S.C. § 78c(a)(17) (1988), but not provisions of NEPA, 42 U.S.C. § 4332(2)(c) (1988), to apply extrater-ritorially. Compare Schoenbaum v. Firstbrook, 405 F.2d (2d Cir. 1968) (en banc), cert. denied,393 U.S. 906 (1969), with Natural Resources Defense Council v. Nuclear Regulation Commis-sion, 647 F.2d 1345, 1366 (D.C. Cir. 1981) (finding that NEPA does not apply extraterritoriallyto Nuclear Regulatory Commission export licensing decisions) and Greenpeace U.S.A. v.Stone, 748 F. Supp. 749 (D. Hawaii 1990), appeal dismissed, 924 F.2d 175 (9th Cir. 1991)(district court held that NEPA does not apply extraterritorially to movements of munitionsthrough and within West Germany pursuant to presidential agreement between United Statesand Germany requiring removal of munitions). Given the courts' tendency to confine the scopeof environmental legislation, any effort to strengthen an extraterritorial environmental regimerequires that Congress explicitly express such an intent.

138 'his notion of comity was first developed in a series of antitrust cases, includingTimberlane Lumber Co. v. Bank of America Nat'l. Trust and Sav. Ass'n, 549 F.2d 597, 613-15(9th Cir. 1976), and later stated as a canon of statutory interpretation in § 403 of Restatement(Third) of Foreign Relations Law. See G. Born & D. Westin, supra note 136. AlthoughCongress could enact a law that violates principles of international comity, courts presume thatCongress did not intend to do so and will not apply such law unless the statute cannot be givennarrow interpretation that accords with deference due to a foreign sovereign's policies. SeeRestatement (Third) § 403, comment g, supra note 3.

139This power is known as prescriptive jurisdiction and accords with notions of internationalcomity. See Restatement (Third), supra note 3, at § 402. To the extent that nationality andterritoriality are the primary basis of jurisdiction, they are similar to the basis of personaljurisdiction; nationality corresponds to the general jurisdiction over claims arising against aUnited States citizen and territoriality corresponds to specific personal jurisdiction because itapplies to activities likely to cause harm within the forum.

14Id. at § 403(2).141Id. at § 403, n. 10 (explaining that the criteria of reasonableness for prescriptive jurisdic-

tion are the same as the criteria for choice of law under the Restatement (Second) of Conflictof Laws).

142See, e.g., Laker Airways, Ltd. v. Sabena Belgian World Airlines, 731 F.2d 909, 949-50(D.C. Cir. 1984). The D.C. Circuit criticized the unprincipled balancing:

Vol. 25, No. 1


ronmental protection and setting forth a method by which courts canbalance those interests may help courts decide when environmentaldisputes should be subject to U.S. tort law, U.S. public law and U.S.jurisdiction.

In the absence of legislative guidance, courts should determinewhether to regulate extraterritorially by openly balancing the likelyeffects of their actions.1 43 Courts should conduct two distinct inqui-ries to determine whether extraterritorial environmental regulation isreasonable. Courts must determine the costs and benefits associatedwith such regulation in terms of environmental protection and bur-dens on economic development. In addition, they should considerwhether independent political and ethical values favor or disfavorextraterritorial regulation.'"

Another fundamental approach to statutory interpretation under An-glo-American law is the social purpose approach. Under this approach,the court will make sure that the construction of a statute shall suppresssubtle inventions and advance the purpose according to the true intent ofthe makers of the Act.1 45 Congressional abrogation of prior nationalagreements or treaties can be accomplished either by a statutorydenunciation of the treaty, a denunciation coupled with legislationinconsistent with the prior treaty or a repeal by implication, wheresubsequent legislation does not explicitly abrogate a treaty but is foundto override provisions of the prior treaty.

While Congress clearly has the power to denounce treaties oragreements, the intention to abrogate or modify a treaty is not to belightly imputed to Congress.46 The canon of construction developedby the courts has been that when a statute and a treaty relate to thesame subject, the courts will always endeavor to construe them so as

Given the inherent limitation of the Judiciary, which must weigh these issues in the limitedcontext of adversarial litigation, we seriously doubt whether we could adequately chartthe competing problems and priorities that inevitably define the scope of any nation'sinterest in a legislated remedy.1431d. at 948-51. Many commentators and courts have expressed a distaste for judicial

balancing of conflicting national laws, claiming that such balancing is a legislative function.Currently, courts are confronted with suits calling for extraterritorial environmental regulationand must decide these suits without any legislative guidance in the environmental field.Ultimately, the best solution might be to enact a special substantive law governing internationaldisputes. See Von Mehren, Special Substantive Rules for Multistate Problems: Their Role andSignificance in Contemporary Choice of Law Methodology, 88 Harv. L.Rev. 347, 358-59(1974). For now, courts must be free to assume this legislative function.

144id.145See E. Bodenheimer, J.B. Oakley and J.C. Love, An Introduction to the Anglo-American

Legal System 137 (1988).I4 Tores v. Immigration and Naturalization Service, 602 F.2d 190, 193 (7th Cir. 1979).

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to give effect to both, if that can be done without violating thelanguage of either. 47 In United States v. The Palestine LiberationOrganization,148 the United States District Court for the SouthernDistrict of New York held that the Anti-Terrorism Act of 1987149 didnot supersede the Headquarters Agreement between the UnitedStates and the United Nations regarding the headquarters of theUnited Nations.150 The court stated that the Anti-Terrorism Act andits legislative history do not manifest congressional intent to abrogatethe obligation of the United States to refrain from impairing thefunction of the Palestine Liberation Organization's Observer Missionto the United Nations."'1 The court further noted that the Anti-Terrorism Act remains a valid enactment of general application eventhough the Headquarters Agreement is still a valid and outstandingtreaty obligation of the United States. The court construed both theHeadquarters Agreement and the Anti-Terrorism Act by giving effectto both without violating the language of either. In TransworldAirlines v. Franklin Mint. Corp., 52 where the question presented waswhether the 1978 repeal of the Par Value Modification Act renderedthe Warsaw Convention's 153 cargo liability limit unenforceable in theUnited States, the Court concluded that the 1978 repeal of the ParValue Modification Act was not intended to affect the enforceabilityof the Warsaw Convention in the United States.

In Speiss v. C. Itoh and Co. (America), Inc.,154 the Fifth Circuitheld that federal statutes ought never to be construed to violate thelaw of nations if any other possible construction remains. It is onlywhen Congress intends to depart from the obligations of a treaty thatinconsistent federal legislation will govern. Thus, unless federal lawsreflect an affirmative disavowal of the rights provided by the treaty, itis the duty of the court to implement the treaty rights. 155 Therefore,for a later Congressional Act to overturn a prior treaty or executiveagreement, there must be a clear showing of a Congressional intent to

147See supra note 126.148695 F. Supp. 1456 (S.D.N.Y. 1988).149Pub. L. 100-204, Title X, § 1002(a), 101 Stat. 1331, 1407, set out in 22 U.S.C.A.

§§ 5201-5203 (West Supp. 1988).150See G.A. Res. 169 (11), 11 U.N.T.S. 11, No. 147 (1947); 61 Stat. 3416, T.I.A.S. No. 1676,

authorized by S.J. Res. 144, 80th Cong. 1st Sess. See 22 U.S.C. § 187 (1982).15'See supra note 146.152466 U.S. 243, 250, 1984 AMC 2402 (1984).153Convention for the Unification of Certain Rules Relating to International Transportation

by Air, Oct. 12, 1929, 49 Stat. 3000, T.S. No. 876 (1934).154643 F.2d 353, 356 (5th Cir. 1981).151Id.

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January 1994 OPA '90 and MARPOL 73/78

so abrogate the treaty or the terms of the treaty and the statute mustbe irreconcilable, so that effect cannot reasonably be given to both. 15 6

In Japan Whaling Ass'n v. American Cetacean Society, 157 theSupreme Court held that nothing in the legislative histories of thePelly and Packwood Amendments 58 requires the Secretary, regard-less of the circumstances, to certify each and every departure fromthe International Whaling Commission's whaling schedules estab-lished pursuant to the International Convention for the Regulation ofWhaling. 159 In McCulloch v. Sociedad Nacional de Marineros deHonduras, 160 the Supreme Court concluded that without the presenceof the affirmative intention of Congress clearly expressed, the provi-sions of the National Labor Relations Act' 6' would not be extendedand applied to foreign vessels. However in South African Airways v.Dole, 62 the D.C. Circuit found in favor of the Secretary of Trans-portation, holding that the Congressional intent of the Anti-ApartheidAct was to breach the Executive Agreement and immediately termi-nate air service with South Africa.

C. Self-Executing Treaty

In international law, there is the presumption that a valid treaty willbe executed by its contracting parties. 63 What is a self-executing

156A repeal by implication is where a treaty and a statute are irreconcilable by their terms,

but there is no clear congressional intent to denounce the treaty. The courts disfavor finding arepeal by implication where a reasonable construction can give effect to both. See Morton v.Mancari, 417 U.S. 535 (1974).

'57478 U.S. 221 (1986).5 8See 85 Stat. 786, as amended, 22 U.S.C. § 1978; 90 Stat. 337, as amended, 16 U.S.C.§ 1821 (Pelly Amendment to the Fishermen's Protective Act of 1%7 directing the Secretary ofCommerce to certify to the President if nationals of a foreign country are conducting fishingoperations in such a manner as to diminish the effectiveness of an international fisheryconservation program, and the President, in his discretion, may then direct the imposition ofsanctions on the certified nation. Also, Packwood Amendment to the Magnuson FisheryConservation and Management Act, requiring expedition of the certification process andmandating that, if the Secretary certifies that nationals of a foreign country are conductingfishing operations in such a manner as to diminish the effectiveness of the InternationalConvention for the Regulation of Whaling, economic sanctions must be imposed by theexecutive branch against the offending nation).

159See International Convention for the Regulation of Whaling [hereinafter "ICRW"], Dec.2, 1946, 62 Stat. 1716, T.I.A.S. No. 1849.

160372 U.S. 10, 1963 AMC 283 (1963).161See the National Labor Relations Act, as amended, 61 Stat. 136, 73 Stat. 541, 29 U.S.C.

§ 151.162817 F.2d 119 (D.C. Cir. 1987).163See Advisory Opinion regarding Exchange of Greek and Turkish Population under

Lausanne Convention VI, P.C.I.J., Ser. B. No. 10, 20, where it was said that a state which has


treaty? The term may be applied to two categories of treaties. Strictlydefined, a self-executing treaty is immediately effective as law uponratification (or exchange of ratifications where required) and entryinto force without further implementation and provides a rule forindividuals and for the federal and state governments.164 A non-self-executing treaty requires implementation by either the legislative orthe executive branch in order to be effective as law. The question ofwhether a treaty is self-executing or not is a matter of practicalconcern, rather than of political polemic, for the executive branchwhen it is called upon to enforce a treaty or for the judicial branchwhen it is called upon to determine individual rights and duties underthe terms of a treaty.

To determine self-execution, U.S. courts look at a series of factorsbut they look primarily at the intent of the drafters, including intentimplied or expressed in the treaty itself. When that language issufficiently precise and indicates that no further government action isneeded to apply the treaty norms, a U.S. court will be willing toconclude that the treaty is self-executing. However, under a longstring of precedents over a hundred years, U.S. courts have ruled thata directly applied treaty has the same status as federal laws and thelatest in time therefore prevails. 165 Thus, for internal law purposes, alater U.S. statute will prevail over the international agreement (whichsometimes causes the United States to violate its internationalobligations).1 66 In other cases, U.S. courts have looked for evidenceof Congressional intent to determine whether a treaty is self-execut-

contracted valid international obligations is bound to make in its legislation such modificationsas may be necessary to ensure the fulfillment of the obligations undertaken.

161'he classic definition of self-executing treaty is found in Foster & Elam v. Nielson, 27U.S. (2 Pet.) 253, 314 (1829). Chief Justice Marshall laid out the basis for distinguishing betweenself-executing and non-self-executing treaties. While ruling on a property claim, the courtinterpreted the Treaty of Amity, Settlement and Limits between the United States and Spain asnon-self-executing. The Court dismissed the plaintiff's claim, declaring that the phrase "shall beratified and confirmed" was the language of contract, and that the legislature must execute thecontract before it can become a rule for the court. This early opinion profoundly affected thelater development of the doctrine of self-executing treaties. See also Iwasawa, The Doctrine ofSelf-Executing Treaties in the United States: A Critical Analysis, 26 Va. J. Int'l L. 627, 633,644-45, 687, 689-90 (1986).

165See Restatement (Third), supra note 3, at § 115. See also L. Henkin, Constitutionalism,Democracy and Foreign Affairs (1990)..

'6Several GATT dispute panel reports have concluded that the implementation of U.S.statutes enacted later than GATT caused the United States to be in contravention of its GATTTreaty obligations. See, e.g., United States Manufacturing Clause, GATI, Basic Instrumentsand Selected Documents, 31st Supp. 74 (1985) (regarding copyright); U.S. Section 337 of theTariff Act of 1930, 36th Supp. 345 (1988).

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ing.167 When Congress clearly expresses its intent in a statute or otherresolutions, the legislative will must be respected. Since Congress hasthe power to enact a statute contrary to a treaty under the last-in-timerule, its power to declare a treaty not directly applicable should alsobe recognized.16 If, in giving its advice and consent to a treaty, theSenate passes a resolution that the treaty is not self-executing, thatexpression of Senate intent should be given effect because it is a sinequa non of the advice and consent.1 69

D. Analysis of the Inconsistencies Between OPA '90 andMARPOL 73/78.

If the last-in-time doctrine is applied to the inconsistencies betweenOPA '90 and MARPOL 73/78, OPA '90, being later in time toMARPOL 73/78 and to the Act that implemented MARPOL 73/78,should supersede the requirements of both. Regulation 13F17 0

adopted by IMO's Marine Environment Protection Committee inMarch 1992, contains requirements for a double hull standard and, inthe alternative, a construction standard involving double sides and ahorizontal deck separating upper and lower cargo tanks (that is, amid-deck) for new tank vessels of 5,000 deadweight tons and above.Other methods of design and construction may also be acceptedprovided that they ensure the same level of protection againstpollution in the event of a collision or stranding. In contrast, OPA '90requires that all new vessels constructed for the carriage of oil whenoperating in United States' waters or the United States' exclusiveeconomic zones be fitted with double hulls.171 The new amendmentsto MARPOL 73/78 entered into force on July 6, 1993 under MAR-POL's tacit amendment procedure which does not require the adviceand consent of the U.S. Senate and does not require an instrument ofratification to be deposited by the President. Pursuant to the suprem-acy clause of the U.S. Constitution, 172 the amendments to MARPOL73/78 (Regulations 13F and 13G) should supersede OPA '90 becausethey are later in time. However, the U.S. made a declaration of

167The view of Congress may be expressed in many different ways. In re Damjanjuk v.

Meese, 784 F.2d 1114, 1116 (D.C. Cir. 1986) (in reports of the Senate Committee on ForeignRelations); Bertrand v. Sava, 684 F.2d 204, 218-19 (2d Cir. 1982) (in legislative history).

168See Riesenfeld, The Doctrine of Self-Executing Treaties and U.S v. Postal: Win at AnyPrice?, 74 Am. J. Int'l L. 892, 901 (1980).

169 See L. Henkin, Foreign Affairs and the Constitution 135 (1972).170 The Mar. 6, 1992 Amendments to MARPOL 73/78, supra note 104.1710PA '90, supra note 4, at § 4115.172 See supra note 125.

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non-acceptance under Article 16 of MARPOL 73/78,173 therebymaking OPA '90 later in time to MARPOL 73/78 (without theRegulations).

Under Article 16 of MARPOL 73/78, there are two different waysby which a Party can prevent an amendment to an Annex fromentering into force for it. The first is to object to the amendmenttogether with other contracting states constituting not less thanone-third of the Parties, the combined merchant fleets of whichconstitute not less than fifty percent of the gross tonnage of theworld's merchant fleet.174 Since Regulations 13F and 13G wereadopted on March 6, 1992175 and one-third of the Parties did notobject, the United States clearly could not avail itself of this proce-dure, as the amendments have in fact already been accepted.

The second would be to make a declaration before the amendmentsenter into force176 which the U.S. in fact made.1 77 What will be theeffect of such a declaration on legal rights and obligations underMARPOL 73/78 in respect of the U.S. and other parties to the treaty?

VIII.AUTHORITY TO IMPLEMENT OPA '90 AND MARPOL 73/78

The effect of such a declaration on legal rights and obligations ofparties to MARPOL 73/78 can be examined by analyzing how U.S. oilpollution laws are enforced and further by addressing its impact oninternational law.

The enforcement of oil pollution law can be viewed through severalstages beginning with the President. 178 Section 4 of the Act to PreventPollution from Ships 79 charges the Secretary of Transportation 180

with the responsibility for enforcing MARPOL 73/78 and requires him

173See supra note 112. See also MARPOL 73/78, supra note 2, at art. 16(2)(f)(ii), whichprovides that a party may notify the Secretary General of the Organization that its expressapproval will be necessary before the amendment enters into force for it.

17 41d.

171The Mar. 6, 1992 Amendments to MARPOL 73/78, supra note 104.17 6MARPOL 73n8, supra note 2, art. 16(2)(f)(ii), (iii). See also, art. 16(4)(b) which provides:

"Any party which has declined to accept an amendment to an Annex shall be treated as anon-party for the purpose of application of that amendment."

177See supra note 112.178 See U.S. Const. art. II, § 3, which states that the President shall take care that the laws

be faithfully executed.17933 U.S.C. § 1903, supra note 51.'"The Secretary referred to is the Secretary of the Department in which the Coast Guard is

operating, currently the Department of Transportation. See 33 U.S.C. § 1901 (7). The Secretaryof Transportation has delegated her responsibility under the Act to the Coast Guard.

Vol. 25, No. I


to prescribe any necessary or desired regulations to carry out theprovisions of MARPOL 73/78.181 Similarly, OPA '90 charges theSecretary of Transportation with the responsibility for implementingOPA '90.182

The Coast Guard is a service in the Department of Transportation.It has the primary duty of enforcing or assisting in the enforcement ofall applicable federal laws in waters subject to the jurisdiction of theUnited States.183 Article I, § 1 of the United States Constitutionlodges all legislative power in Congress. Article I, § 8 also permitsCongress to make all laws which shall be necessary and proper forcarrying into execution the enumerated powers. 1 4 The power of theSecretary of Transportation to prescribe any necessary regulations tocarry out the provisions of MARPOL 73/78 is a delegated authorityfrom Congress. The Secretary of Transportation has delegated to theCommandant, U.S. Coast Guard, the authority to issue regulationsregarding the functions, powers and duties of the Coast Guardtogether with the authority to redelegate and authorize successiveredelegations of that authority within the Coast Guard.18 5 The UnitedStates reserved its position during the adoption of Regulations 13Fand 13G, due to differences with OPA '90 regarding the applicabilityof double hull requirements to certain categories of vessels and theallowance of the mid-deck concept as an alternative to the double-hull.18 6 The U.S. has taken a position with IMO that the expressapproval of the U.S. Government would be necessary before the newinternational tank vessel design standards will be enforced by theU.S. 8 7 The Coast Guard has also established technical standards fordouble hulls on vessels carrying oil in bulk, as cargo or cargo residue,that are constructed or undergo a major conversion under contractsawarded after June 30, 1990.188

OPA'90 requires the Coast Guard to evaluate relevant informationon potental alternatives to the double hull design and send itsevaluation to Congress, along with recommendations on any alterna-tive concepts that afford environmental protection equivalent to (orbetter than) double hulls, which the Coast Guard considers to merit

18'33 U.S.C. § 1903(b).182 0PA '90, supra note 4.' 83See 14 U.S.C. § 1.

184See U.S. Const. art. I.'8 SSee 33 C.F.R. § 1.05-1, referring to 47 C.F.R. §§ 1.45, 1.46.8'5The Mar. 6, 1992 Amendments to MARPOL 73/78, supra note 104.

'87 See supra note 112.188See supra note 113.

January 1994


adoption. 8 9 The U.S. Department of Transportation has transmitteda report to Congress on alternatives to the double hull design for tankvessels. The report states that no other designs are presently avail-able that would provide equal or greater protection to the environ-ment than that provided by the double hull tankers and recommendsthat no changes be made by Congress to OPA '90 concerning thedouble hull requirements for tank vessels. 190 Is it reasonable for theU.S. to violate MARPOL 73/78 and apply its own unilateral action toforeign vessels by virtue of OPA '90?

Several authorities show that it is unreasonable. The inconsisten-cies between OPA '90 and MARPOL 73/78 can be effectively re-solved by considering the following recommendations.

A. Consideration of Studies on Tank Vessel Designs

OPA '90 requires the Coast Guard to issue rules implementingvarious measures to reduce the risk of oil spills in U.S. waters. 91 Asubstantial amount of oil imported to the United States is transportedaboard foreign flag vessels. Since OPA '90 applies to all vessels inU.S. waters, the Coast Guard recognized that U.S. double hullregulations would have a significant global impact. 192

It is a misguided view of OPA '90 for the Coast Guard to concludethat it does not have discretion to apply any other standards otherthan the double hull design standard.1 93 The purpose of OPA '90 is tomitigate oil pollution in waters subject to U.S. jurisdiction, and toadopt a standard that gives equivalent protection that would beconsistent with such purpose. The long-term intent of OPA '90 is todevelop hull designs which maximize environmental protection underas many circumstances as possible. The U.S. Coast Guard partici-pated as a member of the IMO's Steering Committee which coordi-nated a comparative study on tank vessel design. 94 The Coast Guardalso initiated an independent research and development project withHerbert Engineering Corporation, using probabilistic computer mod-

189Td. See also OPA '90, supra note 4.'goLetter from Andrew H. Card, Jr. to Thomas S. Foley (Dec. 24, 1992) (discussing the

report to Congress on Alternatives to Double Hulls in Tank Vessels Design required by§ 4115(e)(1) of OPA '90).

19 10PA '90, supra note 4.192Supra note 113.193

d.194Letter from Andrew H. Card, Jr. to Thomas S. Foley, supra note 190.

Vol. 25, No. I


eling to study oil outflow of various alternative designs. 195 TheHerbert Engineering analysis considered both the double hull andmid-deck tankers to be the most oil preventative and cost effective inthe study. 196 Furthermore, the U.S. Coast Guard should re-evaluatethe IMO Comparative Study on Design Standards which concludedthat both the double hull and mid-deck tanker designs give equivalentprotection.197 The National Academy of Sciences also conducted acomprehensive review of the safety, economic and environmentalimplications of various alternative tank vessel designs and confirmedthe effectiveness of both the mid-deck and double hull designs underdifferent scenarios. 198 Even though the U.S. Coast Guard has estab-lished technical standards for double hulls on vessels carrying oil inbulk as cargo or cargo residue, that are constructed or undergo amajor conversion under contracts awarded after June 30, 1990, theCoast Guard under OPA '9019 is still required to periodically reviewrecommendations from the National Academy of Sciences and otherson methods for further increasing the environmental and operationalsafety of tank vessels; assess the impact of the double hull require-ment on the safety of the marine environment and the economicviability and operational makeup of the maritime oil transporationindustry; and report to Congress. 200 The first report201 transmitted toCongress on alternatives to the double hull design for tank vesselswas inconclusive and misguided.

B. Deference to Administrative Agencies

Several reasons exist for giving some degree of deference to theadministrative agency's view of the law. First, in a highly technicalarea, the agency usually has more experience than the judge inapplying the statute. Second, Congress has given the agency, ratherthan the court, primary responsibility for carrying out the law. Third,it is often important that private individuals or local governments beable to respond immediately in reliance on an administrative agency'sview of the statute. If the agency's view of the statute were given no

1951d.1 Id.197IMO Briefing Papers, Jan. 16, 1992, supra note 102.19Letter from Andrew H. Card, Jr. to Thomas S. Foley, supra note 190.'"See OPA '90, supra note 4. See also House Cong. Rep. No. 101-653, reported in 1990

U.S. Code Cong. & Admin. News 821.Mq0 1d.2°1See supra note 190.

January 1994


credence at all by the court's, it would be unsafe to rely on theagency's position until the issue had been litigated all the way to theSupreme Court. Thus, giving deference to the agency's view servesthe purpose of expediting compliance with the law.

Under the Administrative Procedure Act, 20 2 the standard of reviewfor factual issues depends on the type of proceeding. In an adjudica-tive action, the standard for review of factual issues is the substantialevidence test. The agency's action must be upheld by the court unlessthere is no substantial evidence in the record to support the agency'sruling. With respect to other forms of administrative action, the courtin Citizens To Preserve Overton Park, Inc. v. Volpe, 203 found that thekey to reviewability lay in § 701 of the Administrative ProcedureAct.2o4

In Chevron, U.S.A., Inc. v. NRDC, 205 a case which involved theuse of bubbles in nonattainment regulations under the Clean Air Act,the Supreme Court concluded that the Environmental ProtectionAgency's interpretation represents a reasonable accommodation ofmanifestly competing interests and is entitled to deference. 206 InNatural Resources Defense Council, Inc. v. Coleman,207 the court, inthe interpretation of 46 U.S.C. § 391(a)(7), concluded that, even if theSecretary of Transportation and Coast Guard were under a continu-ing legal duty to revise antipollution regulations governing the design,construction and repair of United States flag vessels engaged in thecoastwise trade, it was not appropriate for the court to impose a stricttime-table for promulgation and revision of regulations where, amongother considerations, it was not in the public interest to impose sucha time-table as it would likely impair the quality of regulation.

202See Administrative Procedure Act, 5 U.S.C. § 701.203401 U.S. 402 (1971).204See 5 U.S.C. § 701, supra note 202, which provides that the action of every administrative

agency is subject to judicial review except (1) where there is a statutory prohibition on reviewor (2) where agency action is committed to agency discretion by law.

205467 U.S. 837 (1984).206The basic idea behind the bubble is to treat the various components of an industrial plant

as a single source for regulatory purposes. Thus, emissions from all stacks are considered onlyin the aggregate. The bubble concept could be used to allow a plant operator to reduce his totalpollution abatement costs by changing the mix of controls so as to maximize emission reductionfor the processes which are least expensive to control, while decreasing controls for processeswhich cost the most to clean up.

27411 F. Supp. 449, 1976 AMC 2507 (D.D.C. 1975).

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C. Consistency of Interpretation with Purpose of Statute

The U.S. Coast Guard's action in establishing technical standardsfor double hulls on vessels carrying oil in bulk as cargo or cargoresidue does not presently satisfy the substantial evidence test.However, if the Coast Guard re-evaluates relevant information onpotential alternatives to the double hull design and issues regulationsadopting the double hull standards of OPA '90 or equivalent stan-dards under MARPOL 73/78, such regulations should not only bedeferred to because of the expertise and experience of the CoastGuard as an administrative agency entrusted with such function, butalso because such regulations would be consistent with the purpose ofOPA '90. OPA '90 in its legislative history pointed out that the bestinterests of the United States would be served by participation in aninternational regime that provides for preventive measures from oilspills at least as effective as domestic law.208 The Coast Guard couldinterpret OPA '90 as a whole statute, i.e., that the double hullrequirement does not alter OPA '90's objective of maintainingconsistency with generally recognized principles of international law.

In Citizens to Save Spencer County v. U.S. Environmental Protec-tion Agency, 2° the court concluded that it is appropriate for anagency in harmonizing conflicting provisions to look for guidelines inthe statute as a whole and to consider underlying goals and purposesof the legislature in enacting statutes, while avoiding unnecessaryhardship or surprise to affected parties, and remaining within gener-ally prescribed statutory bounds.

D. United States Treaty Obligations

The Coast Guard in issuing further regulations could decide toadopt the double hull standards or other equivalent measures asrequired by Regulation 13F because of United States treaty obliga-tions under both the IMO Convention and MARPOL 73/78.

In 1977, environmental organizations, 2 0 which had been critical ofthe Coast Guard for its failure to follow the mandate of the 1972 Ports

2 See House Conf. Rep. No. 101-653, reported in 1990 U.S. Code Cong. & Admin. News814.

2°9600 F.2d 844 (D.C. Cir. 1979).21°The legal arm of national environmental organizations is the Center for Law and Social

Policy, a public interest law firm that represents the Sierra Club, Wilderness Society, NaturalResources Defense Council, National Wildlife Federation, Environmental Defense Fund,Friends of the Earth, National Audubon Society and Environmental Policy Center. The centeris based in Washington, D.C.

January I99W


and Waterways Safety Act, sued the Coast Guard for not implement-ing the Act as an engine for reform but merely as a vehicle forimplementing previously agreed upon international solutions. 21' TheCoast Guard's justification for this approach was that a cooperativeinternational effort for oil pollution control is essential, and that U.S.leadership in this effort is linked to a decision not to go beyondinternational agreements. 212 The United States is a party to the IMOConvention. 2 3 The United States is also a party to MARPOL73/78.214 Even though MARPOL 73/78 is not a self-executing trea-ty, 215 Congress expressly endorsed the tacit amendment procedureprescribed in Article 16(2)(f)(ii) and (iii) of the treaty by passingimplementing legislation to that effect. 216

Every treaty in force is binding upon the parties to it and must beperformed by them in good faith. Under Article 18 of the ViennaConvention on the Law of Treaties, 2 7 a state is obliged to refrainfrom acts which would defeat the object and purpose of a treaty. 218

The United States should refrain from an act that would defeat theobject and purpose of MARPOL 73/78.

211See NRDC v. Adams (Civ. Action No. 76-0181, D.D.C.) This case was settled followingthe Carter 1977 proposals and the IMO Protocols of 1978.212See Hearings on Oil Pollution Caused by Routine Tanker Operations, Before theSubcommittee on Government Activities and Transportation of the House Committee onGovernment Operations, 95th Cong., 2d Sess. (1978) (Statement of Clifton E. Curtis). See alsoOil Transportation by Tankers: An Analysis of Marine Pollution and Safety Measures, Office ofTechnology Assessment, U.S. Congress 83 (1975).213See I. Arroyo, supra note 10, at 30. The author notes that the date of receipt of theinstrument of acceptance for the United States was Aug. 17, 1950.214See MARPOL 7378, supra note 2.

215Supra note 51, the Act to Prevent Pollution From Ships as implementing legislation forMARPOL 7378. See also Abecassis, supra note 41.216See 33 U.S.C. § 1909, Pub L. 100-220, reprinted in 1987 U.S. Code, Cong. & Adm. News,2525. Congress expressly mentioned Article 16 of MARPOL 7378 implemented by § 10(b) & (c)of the Act to Prevent Pollution as an important aspect of the Act, providing the legal structurefor applying the Annex amendment procedures.217Vienna Convention on the Law of Treaties, May 22, 1969. Opened for signature, May 23,1969. U.N. Conference on the Law of Treaties, First and Second Sessions, March 26-May 24,1968 and April 9-May 22, 1969, U.N. Doc. A/Conf. 39/27, at 289 (1969), reprinted in 8 I.L.M.679 (1969).218The rationale for the application of the Vienna Convention is that it generally representsexisting international law. The Secretary of State's letter of transmittal described the ViennaConvention to be generally recognized as the authoritative guide to current treaty law andpractice. See generally Secretary of State Rogers' Report to the President, Oct. 18, 1971, 65Dep't. St. Bull. 684, 685 (1971).

Vol. 25, No. I


E. Law of the Sea Mandate

The Coast Guard should also take into consideration Article 211 ofthe Law of the Sea Convention which requires states, acting throughthe competent international organization or general diplomatic con-ferences, to establish international rules and standards governingvessel-source pollution. Even though the United States is not a partyto the Law of the Sea Convention, the practice of states, supportedby the broad consensus achieved at the Third United NationsConference on the Law of the Sea, has effectively established ascustomary international law the coastal states' jurisdictional powers.A coastal state may not adopt laws and regulations which relate todesign, construction, manning or equipment standards, other thangenerally accepted international standards. 2 9 This is a principle oflaw that has evolved into customary international law. The UnitedStates would be violating such principle by not permitting tankvessels that have equivalent standards to enter United States'navigable waters.

CONCLUSION

MARPOL 73/78 is a global treaty that has 70 contracting states.The United States was a leader in the elaboration of the 1973Convention and its 1978 Protocol, and has been a leader in itsimplementation over the years. United States delegations have al-ways assumed a position of leadership in the proceedings of theMarine Environment Protection Committee. It will be a majorset-back in the development of international maritime law, trade,commerce and environmental protection if the United States decidesto implement the double hull requirement of OPA '90. The principlethat an exercise of jurisdiction is nonetheless unlawful if it is

219Trhe exclusive economic zone is an area beyond and adjacent to the territorial sea, which

by Article 57 shall not extend beyond 200 nautical miles from the territorial sea baselines. Acoastal state does not enjoy sovereignty over its exclusive economic zone; rather, under Article56(1), it has certain sovereign rights for the purpose of exploring and exploiting the naturalresources of the sea-bed, its subsoil and the superadjacent waters, and it has certain limitedjurisdictional rights with regard to the protection and preservation of the marine environment.One should also note that Article 73, which gives powerful rights of arrest and detention in theexclusive economic zone, only applies where this is in the exercise of the coastal state'ssovereign rights to explore, exploit, conserve and manage the living resources of the zone. Inview of the other elaborate and specifically pollution oriented provisions in the Convention,Article 73 should not be taken to cover enforcement of standards relating to oil pollution fromships. See generally, arts. 56, 57, 73, 211 and 217 of the Law of the Sea Convention, supra note3. See also, Abecassis, supra note 41, at 109-10.

January 1994


unreasonable is established in United States law, and has emerged asa principle of international law as well.220 Legislatures and adminis-trative agencies in the United States have generally refrained fromexercising jurisdiction where it would be unreasonable to do so.221

The position set forward in this article is that OPA '90's double hullrequirement is unreasonable because it violates United States treatyobligations. The extent to which a regulation is consistent with thetraditions of the international system is one of the factors to beconsidered in determining whether the exercise of jurisdiction isunreasonable. OPA '90's double hull requirement has disregarded thejustified expectations of the international community by regulatingthe design of ships in a manner inconsistent with generally acceptedinternational standards.

The Coast Guard has a major role to play in prescribing furtherregulations under both OPA '90 and MARPOL 73/78. The CoastGuard should continue to work with IMO to develop internationalcriteria and methodology for tank vessel designs. OPA '90 andMARPOL 73/78 can both be effectively implemented if the UnitedStates imposes standards consistent with those that have beenadopted by the IMO, especially in a situation where the two standardscan be considered as equivalent. As has been noted by one legalscholar:

A ship may strand on the high seas and cause pollution in twoneighboring states, i.e. France and England (as with the Torrey Canyonin 1967). She may be owned by a Liberian company, bareboat charteredto a Bermuda Company, managed by an English Company, timechartered to a Greek company and voyage chartered to an Americancompany. Her cargo may have been sold during the voyage by theAmerican company to a Japanese one. The officers may be English andthe crew Indian. The international nature of the shipping businesscreates such diversity of interests, with potential conflicts of law andjurisdiction. 222

Only through international efforts can solutions be found for the oilpollution problem, which stems from commercial marine activity.The nature of the maritime business mandates multilateral attention.

22°See Restatement (Third), supra note 3, at § 403.221B.E. Carter & P.R. Trimble, International Law 740-41 (1991).222Abecassis, Marine Oil Pollution Laws: The View of Shell International Marine Limited,

8 Int'l. Bus. Law 3 (1980).

Vol. 25, No. 1


Total Loss and Abandonment in the Law ofMarine Insurance

RUBINA KHURRAM*

IINTRODUCTION

The Marine Insurance Act 19061 of the United Kingdom provides in§56 that a loss may be either total or partial, and defines a partial lossas "any loss other than a total loss." The measure of indemnityrecoverable in the event of a total loss is not necessarily complete orabsolute indemnity, but rather, indemnity up to the amount agreed inthe insurance contract. In contrast, in the event of a partial loss, onlya proportionate amount of the agreed limit of indemnity is recover-able.

Total losses in marine insurance are of two kinds, namely, actualtotal loss and constructive total loss. This article proposes to examinethe notion of constructive total loss and the doctrine of abandonment,both of which are unique to marine insurance. It is the author'sintention to present the salient features of these two concepts withreference to the leading cases. The distinction between the doctrinesof subrogation and abandonment also will be discussed.

IIACTUAL TOTAL LOSS

An actual total loss is said to occur where, for example, a vesselsinks in very deep waters and is not recoverable; where it is capturedand condemned; or where, as in Cossman v. West,2 it is salved andsold under an order of the admiralty court for less than the salvage

*B.A., M.A., LL.B., LL.M. (Karachi), LL.M. (IMLI). Advocate, Education Officer, and

Lecturer in Maritime Law, Pakistan Marine Academy, Karachi. Formerly Lecturer in PoliticalScience and Comparative Law, Federal Government Degree College, Peshawar and WahCantonments, Pakistan.

'Hereinafter referred to as "the Act."2(1887) 13 App. Cas. 160.


charges. It remains to be inquired as to what kind of casualty amountsto an actual total loss. Goods are regarded as having become an actualtotal loss as soon as they cease to be goods of the kind insured froma commercial point of view. 3 Lord Abinger, in the leading case ofRoux v. Salvador,4 held that:

If, in the progress of the voyage, the thing insured becomes totallydestroyed or annihilated, or if it be placed by the perils insured againstin such a position that it is totally out of the power of the assured or theunderwriter to procure its arrival the latter is bound, by the very letterof his contract, to pay the sum insured.5

A partial or constructive total loss may develop into an actual totalloss after the policy expires. Generally speaking, there are threeclasses of actual total loss: those cases where the subject matter isdestroyed; where it is so damaged as to cease to be a thing of the kindinsured; or where the assured is irretrievably deprived of the insuredsubject matter. In the case of total loss by deprivation, it is unnec-essary to deal separately with ships and goods. But in consideringtotal losses by destruction, the classes of insurance need to be treatedseparately.

An actual total loss of freight is not difficult to determine where aship or goods have been actually lost so that freight can no longer beearned. But freight may be actually lost even when the ship and goodsare still in existence, though so damaged as to entitle the assuredunder ship and goods policies to regard them as commercially lost andno longer of any value to him since their reconditioning or recoverywould cost more than their value when repaired. In such cases asRankin v. Potter,6 the loss of freight on a policy on freight would bean actual total loss. So an actual total loss of freight can occur wherethe adventure is frustrated, such that the shipowner is freed from hisobligations under the carriage contract, even though the ship, andpossibly the goods, remain in existence.

According to §57(1), an actual total loss occurs: "Where thesubject-matter insured is destroyed, or so damaged as to cease to bea thing of the kind insured or where the assured is irretrievablydeprived thereof." There are three elements in this definition that cangive rise to a claim for actual total loss, namely:

3See J. Goodacre, Marine Insurance Claims 661 (2d ed. 1981).4(1836) 3 Bing (N.C.) 266.5Id. at 286.6(1873) L.R. 6 H.L. 83, at 102.

Vol. 25, No. 1

Total Loss and Abandonment

(1) if the subject matter is destroyed; or,(2) if it ceases to be a thing of the kind insured; or,(3) if the assured is irretrievably deprived of the subject matter.Some common examples of the first element are destruction of a

ship by a catastrophic fire, or as a result of sinking in very deepwaters, or by foundering in a severe tropical storm. A ship also couldbe totally destroyed by enemy attack in war time. Where a ship isreported missing over an extended period of time there is a rebuttablepresumption that she is lost as a result of a peril of the sea. As wasmade clear in the Popi-M, 7 however, in such instances the onus restson the assured to show that the ship was seaworthy.

The second element mentioned above is often described as a totalloss by "alteration of species." The classic example is that of a tankerwhich, after a disastrous fire, has sunk and is no longer a thing of thekind insured but now is simply a "charred hulk of twisted sunkenmetal."

The loss by alteration of species also frequently occurs with respectto cargoes. For example, in Montoya v. London Assurance8 a cargoof tobacco was rendered worthless as a result of being tainted by thestench of rotten hides that had been damaged by the entry of seawater into the cargo hold. In another case, a cargo of dates was sodamaged by water that it became inedible and unfit for humanconsumption. 9 In the same case it was held by Lord Esher, M.R., thatwhere a thing damaged is no longer "merchantable" as a thing of thekind insured it is a loss by alteration of species for purposes ofbusiness or mercantile value. Where damaged cargo is capable ofbeing restored for reduced commercial value, however, the loss isheld to be only partial and not an alteration of species.10

The final provision dealing with actual total loss is the one generallyreferred to as "irretrievable deprivation." In this day and age, due toadvancements in salvage and other technology, it is difficult to allegethat a ship or other property at sea is irretrievably lost. Virtuallyanything lost at sea is capable of being retrieved. However, captureor seizure of a ship by an enemy could constitute irretrievabledeprivation. In this regard, however, it is interesting to note that inMarstrand Fishing Co. v. Beer (The "Girl Pat")" the court held that

7[1985] 2 Lloyd's Rep. 1.

8(1851) 6 Exch. 451.9See Asfar v. Blundell, [1896] 1 Q.B. 123.I0See Francis v. Boulton, (1895) 1 Com. Cas. 217 (damaged rice dried in a kiln and sold as

low quality rice)."(1936) 56 LI. L. Rep. 163.

JanuMr 1I94


the vessel was never irretrievably lost. In that case, the crew of thevessel had taken possession of her by an act of barratry. But afterseveral weeks of searching by the authorities, the vessel was appre-hended and the crew arrested.

Where, however, because of technological feasibility, an argumentbased on irretrievable deprivation is likely to fail, there may beanother avenue available to the assured. If as a practical matter thecost of retrieval exceeds the value of the retrieved ship or thing, theassured may be able to claim that a constructive total loss hasoccurred.

IIICONSTRUCTIVE TOTAL LOSS: GENERAL PRINCIPLES

The doctrine of constructive total loss is unique to marine insur-ance, as Moore v. Evans2 makes clear. The celebrated Chalmersdescribed the peculiarities of constructive total loss in the followingwords:

Constructive total loss lies midway between actual total loss on the onehand, and partial loss on the other. It is in effect a hybrid loss, and itsdual character has complicated the decisions. In some instances noticeof abandonment has been given as a matter of precaution, and a case istreated as one of constructive total loss when the facts would havejustified its being treated as an actual total loss. In other instances duenotice of abandonment has not been given, and the case has to betreated as a partial loss, though the facts show a constructive total loss.... The result is that the outlines of the law are somewhat blurred. 13

The statutory definition of constructive total loss is contained in§60 of the Act, which provides as follows:

(1) Subject to any express provision in the policy, there is a construc-tive total loss where the subject-matter insured is reasonably aban-doned on account of its actual total loss appearing to be unavoidable, orbecause it could not be preserved from actual total loss without anexpenditure which would exceed its value when the expenditure hadbeen incurred.(2) In particular, there is a constructive total loss:

(i) Where the assured is deprived of the possession of his ship orgoods by a peril insured against, and (a) it is unlikely that he

12(1918) A.C. 185, 194.

I3M. Chalmers & D. Owen, A Digest of the Law Relating to Marine Insurance §61, at 83-84(2d ed. 1903) (hereinafter Chalmers).

Vol. 25, No. I


can recover the ship or goods, as the case may be, or (b) thecost of recovering the ship or goods, as the case may be, wouldexceed their value when recovered; or

(ii) In the case of damage to a ship, where she is so damaged by aperil insured against that the cost of repairing the damagewould exceed the value of the ship when repaired. In estimat-ing the cost of repairs, no deduction is to be made in respect ofgeneral average contributions to those repairs payable by otherinterests, but account is to be taken of the expense of futuresalvage operations and of any future general average contribu-tions to which the ship would be liable if repaired; or

(iii) In the case of damage to goods, where the cost of repairing thedamage and forwarding the goods to their destination wouldexceed their value on arrival.

Section 60(1) provides a general definition of constructive total lossin respect of any insured subject matter. There are three kinds ofproperties insured, namely: ship, cargo, and freight. This subsectionis of general application to all such properties. There are three notableelements. First, the subsection is subject to any express provisioncontained in the policy. In other words, the principle of freedom ofcontract is maintained, bearing in mind the standard forms of marineinsurance policies in use commercially.

Second, there can be a constructive total loss where the subjectmatter is reasonably abandoned under circumstances where actualloss of the property is imminent. An example of this could be wherea ship is stranded on the rocks and, though it is not yet an actual totalloss, the possibility of it breaking up into pieces and being completelydestroyed prompts the master to abandon the ship.14 Third, using thesame example, there could be a constructive total loss if the vesselcould in fact be prevented from becoming an actual total loss, but notwithout incurring an expenditure that would be in excess of its value.

Section 60(2), on the other hand, sets out specific conditions inrespect of ship and goods. Paragraph (i) is again of general applicationto both ship and goods. The key requirement for constructive totalloss is that there must be a deprivation of possession resulting from aninsured peril. In addition, there are two alternative requirements.There must either be the unlikelihood of recovery, or, if recovery ispossible, the cost of such recovery would be in excess of the value ofthe ship or goods when recovered.

14See R. Lambeth, Templeman on Marine Insurance: Its Principles and Practice 217 (5th ed.1981).

January 1994


Paragraph (ii) refers specifically to damage to ships and providesthat there can be a constructive total loss if the cost of repairing suchdamage exceeds the value of the ship after repairs. There are furtherdetails provided in respect of inclusion or exclusion of generalaverage contributions and salvage expenses in the calculation of thecost of such repairs. Paragraph (iii) specifically provides, in respect todamage to goods, that there is a constructive total loss if the cost ofrepairs plus the costs of forwarding the goods to the destination (i.e.,transhipment costs) would be in excess of the value of the goods uponarrival.

In summary then, it can be said that there are basically two typesof constructive total losses: (1) where the assured is deprived of thepossession of the insured property, and under the circumstances thelikelihood of its recovery is remote or virtually nil; and, (2) where theinsured property is so lost or damaged that the cost of repairs wouldfar exceed the value of the property after its recovery or repair.

A. Deprivation of Possession

The issue of deprivation was discussed at length by Staughton, J.,in The Bamburi.1 5 In that case the vessel had been detained by Iraqiauthorities at the outbreak of the Iran-Iraq war. A skeleton crewremained on. board and as of the date of the arbitration decisionpermission for the vessel to leave had not been granted by theharbour master. One of the issues before the arbitrator was whether,under the Act, the owners had been deprived of possession of thevessel.

In reviewing the authorities Staughton, .J., first dealt with theclaimants' contention that the words "deprived of the possession" in§60(2)(i) carried the same meaning as the words "Owner's loss of thefree use and disposal" of the vessel as used by writers prior to theadoption of the Act. The respondents argued that the law wasincorrectly stated by such writers. They further argued that Rodoca-nachi v. Elliott,16 a leading case in the field, was authority for theproposition that with respect to goods an owner could claim either forthe loss of the goods themselves or for the loss of the adventure. InRodocanachi, the detainment of a cargo of silk goods in Paris due toa siege of the city by the Germans was held to be a constructive totalloss due to restraint of princes. In contrast, in the case of a policy on

15[1982] 1 Lloyd's Rep. 312.16(1874) L.R. 9 C.P. 518.

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the ship the insurer is liable for the loss of the ship but not for the lossof the adventure.

While Staughton, J., could not find a rationale for the distinctionbetween ship and goods, he concluded that the principle was sowell-established as to be beyond question. He pointed out further thatthe "free use and disposal" test was cited with approval by the courtin Polurrian Steamship Co. v. Young.' 7 After a thorough survey ofthat case, he held that "the loss of 'free use and disposal' in this caseamounted to loss of possession within the meaning of the Policy."' 8

B. Likelihood of Recovery

The question of whether it is unlikely that the assured will recoverthe insured res must be considered in reference to a certain timeframe. In The Bamburi it was pointed out that §62(3) of the Actrequires that in the case of a constructive total loss notice ofabandonment must be given with "reasonable diligence." Assumingthe assured has fulfilled this requirement, it would be logical to startcounting the time for determination of the unlikelihood of recoveryfrom when the notice is given. This was how the matter was decidedin The Bamburi. It was held further that "recovery must be unlikelywithin a reasonable time."' 9 Given the facts of The Bamburi, areasonable time was held to be twelve months from the date thatnotice of abandonment was given.

C. Cost of Repair in Excess of Repaired Value

The cost of repair exceeding repaired value basis for a constructivetotal loss claim pre-dates the Act. As pointed out later in this article,it is based on the commercial realities of the shipping industry. InBenson v. Chapman2o it was stated that:

Where the damage to the ship is so great from the peril insured againstthat the owner cannot put her in a state of repair necessary for pursuingthe voyage insured, except at an expense greater than the value of theship, he is not bound to incur that expense, but is at liberty to abandonand treat the loss as a total loss. 2'

7(1915) 19 Com. Cas. 143.

18[1982] 1 Lloyd's Rep. at 321.19Id.20(1843) 6 M. & Gr. 792.211d. at 810.

101January 1994


In Sailing Ship "Blairmore" Co. v. Macredie22 the test was statedby Lord Watson as follows:

it must be shown that a shipowner of ordinary prudence and uninsuredwould not have gone to the expense of raising and repairing the vessel,but would have left her at the bottom of the sea, because her marketvalue when raised and repaired would probably be less than the cost ofrestoration and repair.23

Notably, the Institute Clauses stipulate that the insured value,rather than the actual value after repairs, is the value to be taken intoaccount. Similarly, it is provided in the Institute Clauses that thevalue of the wreck cannot be added to the cost of repairs. 24

D. Distinction Between Actual Total Loss and Constructive TotalLoss

It is stated in Arnould that the nature of a constructive total loss isbest demonstrated by comparing it with an actual total loss. Whileactual total loss is a total loss in law as well as in fact, a constructivetotal loss is something of a legal fiction. In other words, it is a totalloss in law but not necessarily in fact. It is capable of being convertedinto a total loss in fact by the process of abandonment which is a legaldoctrine that co-exists with constructive total loss and is peculiar tothe law of marine insurance. Thus, it has been written: "A construc-tive total loss exists when the subject matter insured is not in facttotally lost, but is likely to become so, from the improbability,impracticability or expense of repair or recovery." 25

A further exposition of the doctrine is provided by the same authorin the following words:

Mhat is a case of constructive total loss where the thing insured hasbeen reduced to such a state or placed in such a position, by the perilsinsured against, as to make its total destruction or annihilation thoughnot inevitable, yet highly probable or its ultimate arrival under theterms of policy though not utterly hopeless, yet exceedingly doubtful. 26

22(1898) A.C. 593.

2Id. at 603.

24This issue was a source of great controversy and conflicting decisions before being settledby express stipulation in the Institute Clauses. For a description of the controversy, see M.Mustill & J. Gilman, Arnould's Law of Marine Insurance and Average §§1196-1200, at 981-85(16th ed. 1981) (hereinafter Arnould).

25Id. at §1168, at 954-55.26Id. at §1169, at 955-57.

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Often the distinction between actual and constructive total loss hasbeen characterized by the distinction between practical impossibilityand commercial or business impossibility.27 When the cost of carry-ing on business is so prohibitive that it is virtually impossible for thecommercial venture to "stay afloat," the reality of the market placedictates the course of the law. The distinction between actual andconstructive total loss is illustrated well by George Cohen, Sons &Co. v. Standard Marine Insurance Co.28 In that case an old navalvessel was being towed to a particular location to be dismantled andbroken apart. During the passage the vessel ran aground on the Dutchcoast. In regards to a dispute as to whether the incident gave rise toan actual or a constructive total loss, Roche, J., after citing therelevant statutory definition of actual total loss, held as follows:

Having regard to the whole of the evidence... I am of [the] opinionthat this vessel physically could be got off. It would be a matter of greatelaboration and difficulty, but at all events, putting the matter at thehighest, I am not satisfied that she could not .... In these circum-stances there has been no irretrievable deprivation which a Court canfind by reason of physical impossibility.29

It is interesting to note that Roche, J., also stated in his opinion thatboth in accordance with the Act, as well as the common law, nonotice of abandonment need be given where an actual total loss isrightfully claimed. The learned judge gave two reasons for holdingthat this was a case of constructive total loss. First, after ruling thatthe argument of irretrievable deprivation failed, he was satisfied thatthe vessel could be gotten off the ground, albeit at a cost far exceedingthe insured value of the vessel. Second, the evidence before the courtestablished that while retrieval of the vessel would be an engineeringfeat, it was not a technological impossibility. This case thus illustratesthe point made earlier in this article that while a claim for actual totalloss may fail due to the failure of the irretrievable deprivationargument, a claim for constructive total loss may well succeed.

27See supra note 6.2(1925) 21 L. L. Rep. 30 (Q.B.).291d. at 33.

103January I N4


IVDOCTRINE OF ABANDONMENT

As has been pointed out elsewhere, the term "abandonment" is notdefined in the Act.30 There are therefore different connotations to theterm. The first may be described as the "legal" connotation, whichsignifies the "voluntary cession" or giving up by the assured to theinsurer the remains of the res, together with all the residual rights andremedies attached it. 31 This is the meaning which is contemplated in§§61, 62, and 63 of the Act. It is clear from a reading of these sectionsthat "abandonment" in this sense is a legal concept that operatesonly in connection with the doctrine of constructive total loss. 32

Besides the statutory connotation, abandonment also can takeplace by operation of law independent of a voluntary cession. Thisoccurs in cases where voluntary abandonment is not necessary, suchas in the instance of an actual total loss. As pointed out in Arnould,"Abandonment is ... an incident of all cases of total loss, whetheractual or constructive. "33 Chalmers states that in this sense it is acorollary of the doctrine of subrogation which is a necessary incidentof every contract of indemnity.34

In the leading case of Kaltenbach v. MacKenzie,35 Brett, L.J.,provides a clear exposition of this concept in the well-known passagecited below:

There are two kinds of total loss: one which is called an actual totalloss, another which in legal language is called a constructive total loss- but in both the assured claims as for a total loss. Abandonment,however, is applicable to the claims whether it be for an actual total lossor for a constructive total loss. If there is anything to abandon,abandonment must take place, as for instance, when the loss is anactual total loss, and that which remains of a ship is what has beencalled a congeries of planks, there must be an abandonment of thewreck, or where goods have been totally lost, as in the case of Roux v.Salvador, but something has been produced by the loss, which wouldnot be the goods themselves. If it were of any value at all, it must beabandoned. But the abandonment takes place at the time of thesettlement of the claim; it need not take place before.... Wheneverthere is a contract of indemnity, there must be an abandonment on the

"°Amould, supra note 24, at §1171, at 957.311d. See also Arnould, supra note 24, at §1171, at 958.32 See supra note 6, at 144, and Kaltenbach v. Mackenzie, (1878) 3 C.P.D. 467, at 471.33Arnould, supra note 24, at §1259, at 1043.3See Chalmers, supra note 13, at §80, at 118-19.35(1878) 3 C.P.D. 467.

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part of the person claiming indemnity of all his rights in respect of thatfor which he receives indemnity. 36

The third connotation of the term abandonment has to do with thesense in which it is used in §60 of the Act. This may be characterizedas the literal or physical sense of the term. At the risk of beingrepetitive, it is important in this context to reiterate the definition of"constructive total loss" in §60(1). Section 60(1) refers to the subjectmatter insured being "reasonably abandoned." It is submitted thatthe word "abandoned" in this respect means the physical abandon-ment of the res, i.e., where the res has been given up for lost as amatter of objective fact.37

The decision to physically abandon a ship in circumstances involv-ing a potential total loss of the vessel is one that is usually made bythe master and not the assured. Furthermore, such physical aban-donment can take place regardless of the existence of a relevantmarine insurance policy. For example, in Roura & Fourgas v.Townend38 the court held that even though there was no insurancecoverage on the ship itself, for the purposes of the freight policy,there was a constructive total loss of the ship. Clearly, therefore,abandonment in terms of §60 of the Act is not simply abandonment infavor of the insurer.

That abandonment to the insurer is not a necessary requirement ofa constructive total loss, but only of a claim in respect of such a loss,was settled by the decision of the. House of Lords in Robertson v.Nomikos. 39 The construction of abandonment in §60 was discussed atlength by Lords Wright and Porter. The claim by the assured was ona freight policy that provided that if the vessel became a constructivetotal loss, the assured would be entitled to recover the entire amountof the insured freight. After suffering heavy damage the vessel wasrepaired and the cost of repairs exceeded the insured value of thevessel. Although the vessel was never physically abandoned, thecourt held that for the purposes of the freight policy the vessel was aconstructive total loss within the meaning of §60 and upheld theclaim. 40

Last but not least, the fourth connotation of "abandonment" is theone in which the term is often confused with "notice of abandon-

36Id. at 470-71.3 See Court Line Ltd. v. The King, (1945) 78 U. L. Rep. 390.8(1919) 1 K.B. 189.

39[1939] A.C. 371.40The shipowner did recover for a partial loss on the hull policy after effecting the repairs.

January I W4

106 Journal of Maritime Law -and Commerce

ment" and used incorrectly as a substitute for, or interchangeablywith, the latter expression. The notice is a procedural requirementunder the Act and is an adjustment to the legal or statutory conno-tation incidental to the claim for a constructive total loss. This pointwill be discussed in further detail later.

The Act provides that in the event of constructive total loss theassured may treat the loss as a partial loss, or treat it as if it were anactual total loss, in which case he will then have to abandon theproperty to the insurer.4' This provision illustrates the notion that aconstructive total loss is a legal fiction, but is convertible to an actualtotal loss in fact by the act of abandonment. The rationale behind thislegal fiction is to provide the insurer with the means to recoupwhatever he can from the abandoned vessel or property after he hasindemnified the assured to the extent of his contractual liability.Where there is a valid abandonment, the insurer is entitled to takeover all the proprietary rights and interests of the assured in theinsured property.

A. Notice of Abandonment

It is obvious from the above discussion that in a case of construc-tive total loss the assured has to abandon the property to the insurerbut for this purpose, i.e., if he elects to abandon the insured subjectmatter, he must give notice of abandonment, otherwise the loss canbe treated only as a partial loss.42 The first reason for notice is that theassured should inform the underwriter immediately as to what he hasdone and should not keep it secret in the hopes of being able to takeadvantage of a subsequent change in circumstances. The secondreason for giving notice of abandonment is so that the insurer mayevaluate the measure of the indemnity against the benefit that mayaccrue to him from the abandoned res. In essence, abandonment inthe event of a constructive total loss is a reciprocal exchange. A thirdfactor is the right of the assured to recover for a total loss depending

4 Section 61 of the Act reads as follows:

Where there is a constructive total loss, the assured may either treat the loss as a partialloss or abandon the subject-matter insured to the insurer and treat the loss as if it were anactual total loss.

42Section 62(1) provides as follows:

Subject to the provisions of this section, where the assured elects to abandon thesubject-matter insured to the insurer he must give notice of abandonment. If he fails to doso, the loss can only be treated as a partial loss.

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upon whether the nature of the thing abandoned continued to existdown to the time of bringing the action.

Consideration of time is also important in the election of abandon-ment. After receiving information about the thing to be abandoned,the assured should give notice of abandonment without delay.Section 62(3) of the Act provides: "Notice of abandonment must begiven with reasonable diligence after the receipt of reliable informa-tion of the loss, but where the information is of doubtful character theassured is entitled to a reasonable time to make inquiry."

In Kaltenbach,4 3 the assured was informed on 7th February thatthe ship was a constructive total loss. On 23rd February she was soldfor what she could fetch. On 10th March notice of abandonment wasgiven, but the court held that it was too late. Therefore, if the assuredneglects to abandon within a reasonable time, the right to abandonmay be lost.

Section 62(2) deals with the manner in which notice of abandon-ment may be given. It is notable that this provision requires anunconditional abandonment of the res to the underwriter. It reads asfollows:

Notice of abandonment may be given in writing, or by word of mouth,or partly in writing and partly by word of mouth, and may be given inany terms which indicate the intention of the assured to abandon hisinsured interest in the subject-matter insured unconditionally to theinsurer.

In practice, notice of abandonment is generally given by means ofa letter or a pro forma intimation. It is now well-established in Englishjurisprudence that a written notice of abandonment is not necessary,and that an oral intimation of the assured's intention to abandon issufficient to comply with the Act. Indeed, notice may be partly inwriting and partly oral, so long as the intention of the assured toabandon is clear from his conduct. Furthermore, there must beevidence of unconditional abandonment, whether communicatedorally or in writing."

The question of how the assured's intention to abandon is to begleaned from the communication is of some significance. In Parmeter

43See supra note 35.44See, e.g., Hall v. Hayman, (1911) 17 Com. Cas. 81, and Vacuum Oil Co. v. Union

Insurance Society of Canton, (1926) 32 Com. Cas. 53. See also Russian Bank for Foreign Tradev. Excess Insurance Co., (1919) 1 K.B. 39 (C.A.), where a notice contained a condition to theeffect that the assured would release the insurer from liability if a certain value was attributedto a cargo of barley.

January 1994


v. Todhunter,45 Lord Ellenborough held: "The abandonment must bedirect and express and I think the word 'abandon' should be used tomake it effectual." In that case, it was the insurance broker whocommunicated with the underwriters and asked them to treat the lossin question as a total loss and issue the necessary directions for actionto be taken regarding the vessel and its cargo. Lord Ellenboroughwent so far as to say that oral notices of abandonment ought to beprevented entirely. Nevertheless, they were held to be operative andacceptable.

The Parmeter decision was disapproved of by the Privy Council inCurrie v. Bombay Native Insurance Company.46 In that case, theword "abandonment" was not used but the court held that themessage as communicated was sufficiently clear to indicate theassured's intention to abandon his interest in the subject matter to theinsurer. Subsequent cases have established quite clearly that oral ormixed notices are acceptable and use of the word "abandonment" or"abandon" is not necessary so long as the intention to abandon isotherwise clear from the language in the communication.

In Cohen,47 the assured wrote to his underwriter that the vesselinsured was a total loss and asked to be paid the proceeds of theinsurance. Roche, J., held that even though the word "abandon-ment" did not appear in the notice it was sufficient for the purposesof the Act. In the case of The Litsion Pride,48 the sending of telexesfollowed by a writ claiming for total loss was held to be a valid noticeof abandonment. In Panamanian Oriental Steamship Corporation v.Wright,49 the policy endorsed with a claim for constructive total losssubmitted to the insurer by a broker was held to be a sufficient noticeof abandonment. 50

B. Acceptance of Notice and Change of Circumstances

The essence of abandonment is that there must have been a totalloss. If a loss in fact has not occurred, the giving of a notice ofabandonment will be considered premature and acceptance of thenotice by the insurer may be refused. Whether or not a constructive

45(1808) 1 Camp. 541.46(1869) L.R. 3 P.C. 72.47See supra note 28.48[1985] 1 Lloyd's Rep. 437.49[1970] 2 Lloyd's Rep. 365.- TIhe decision was reversed by the Court of Appeal on other grounds unrelated to the giving

of the notice of abandonment.

Vol. 25, No. I


total loss has in fact occurred depends on the state of affairs at thetime of the issuing of the writ.

In Ruys v. Royal Exchange Assurance Corporation,51 proceedingshad been commenced by the shipowners against the underwriters.During the proceedings, the vessel was in fact in the shipowners'possession, having been released by an Italian prize court. Theinsurers alleged that since the ship had been restored, the owners'claim for constructive total loss was invalid. The court, however,held that the circumstances prevailing at the time when the proceed-ings were instituted was the determining factor as to whether theclaim for constructive total loss was valid under the policy. At thetime the writ was issued the assured had in fact lost possession of theship. Subsequently, however, there was a change of circumstanceswhereby possession was returned to the assured, and this occurredbefore the matter went on trial. The rule which emerges from thiscase is that in the event of a change of circumstances between thetime the writ is issued and the time of commencement of the trial, thematerial time for determining whether a state of constructive totalloss existed is the time of issuance of the writ.

It is important to stress that a claim made in conjunction with an actof abandonment of the res by the assured is prima facie of no benefitto the assured, unless the insurer accepts the notice.5 2 Furthermore,the factual state of affairs at the time of abandonment does notnecessarily determine, as a matter of law, whether or not there was aconstructive total loss. Where the underwriter accepts the notice andpays indemnification in respect of a total loss there is no debate as towhether there was a constructive total loss. In such event, the insureris free to derive whatever benefit he can from the abandoned res.Indeed, if the underwriter simply accepts the notice it becomesobvious that he acknowledges the claim as valid for the purposes ofa constructive total loss. Section 62(6) thus provides: "Where noticeof abandonment is accepted the abandonment is irreversible. Theacceptance of the notice conclusively admits liability for the loss andthe sufficiency of the notice." The insurer then utilizes the thingabandoned to his own benefit. The acceptance of the notice ofabandonment by the insurer thus signifies an admission by theunderwriter of the alleged total loss of the assured's property by aninsured peril, and the acceptance is then irrevocable.

5'(1897) 2 Q.B. 135.52Templeman, supra note 14, at 221.

109January IM9


If the insurer refuses to accept the notice of abandonment, thereare basically two avenues open to the assured. First, if there is anappropriate provision in the policy he can treat the loss as a partialloss and be indemnified accordingly. Section 62(4) of the Act providesthat the assured's rights are not prejudiced by a refusal of the insurerto accept the notice of abandonment if the notice was properly given.The assured's right to claim for a partial loss in such event is notprejudiced by the fact that at the time of the notice, on the facts of thecase, a constructive total loss might have been validly established. InPesquerias y Secaderos de Bacalao de Espana, S.A. v. Beer,53 it washeld by Atkinson, J., that by their very actions the plaintiff shipown-ers demonstrated that they were treating the loss as partial and werenot claiming a constructive total loss; indeed, such action by theplaintiffs went condoned and free of any objections by the insurer.

The other course of action available to an assured whose notice ofabandonment is not accepted by the insurer is to legalize the claim bythe issuance of a writ; in other words, to seek the aid of properjudicial process in order to enforce his alleged claim. The time of theissuing of the writ, as we have seen, is crucial in that it is the materialtime at which it is determined whether a constructive total losssituation existed to justify a claim. It is important to note that wherethere is a change of circumstances between abandonment and theissuance of the writ the state of affairs at the time of issuance of thewrit is again the material time for determining whether or not therewas a constructive total loss. If the assured fails in his proceedingsagainst the insurer for a constructive total loss he may still be in aposition to claim for a partial loss under his policy.

Notably, if there is a change of circumstances between the act ofabandonment and the issuance of the writ the state of affairs at thetime of the issuance of the writ dictates whether or not there was avalid constructive total loss. If, for example, the vessel was undercapture at the time of the abandonment but had been restored to theowner by the time the writ was issued, a claim for constructive totalloss would be defeated. The notable exception to this rule is wherethe change of circumstances occurs as a result of the underwriter'saction. In such instances, the state of affairs at the time of theabandonment would be looked to by the court to determine whetherthere was a valid constructive total loss.

In Macredie,54 the Blairmore sank in San Francisco Bay as a result

53(1946) 79 LI. L. Rep. 417 (K.B.).54See supra note 22.

Vol. 25, No. 1


of an insured peril. The notice of abandonment given by the assuredshipowners was rejected by the underwriters. Shortly thereafter,however, the underwriters proceeded to salvage the vessel and raiseher off the bottom. They were entitled to do this under the "waiverclause" in the policy, paying for the expenses themselves. In pro-ceedings commenced against the underwriters for payment of analleged total loss, the shipowner conceded that the cost of repairs atthe time of issuance of the writ was less than the value of the vesselafter repairs, but contended that the cost of repairs plus the costincurred by the underwriters would be in considerable excess of thevalue of the ship after repairs. The underwriters contended that thecost incurred by them should not be taken into account in thisdetermination, and that there was, consequently, no basis for a claimfor constructive total loss.

The resulting decision of the House of Lords was clear: theintervening actions of the underwriters could not be allowed toimpact on the rights of the assured under the policy. In other words,a claim for constructive total loss by the shipowner was valid in thecircumstances. The court ruled that the material time for determina-tion of the question as to whether there was a constructive total losswas the time of abandonment and not the time at which legalproceedings were commenced. The claim of the assured could not beconverted into a partial loss simply because of the actions taken bythe underwriters to restore the condition of the vessel prior tocommencement of the proceedings by the assured. Lord Watson heldthat the arguments submitted by the underwriters in this regard werecontrary to the general law of contracts under which a party to acontract cannot benefit from the contract, or defeat the obligationswhich he has undertaken to fulfil, by his own act, omission, ordefault. 55

C. Waiver of Notice of Abandonment

There is often the case where the assured gives notice of abandon-ment which the underwriter refuses to accept. In such a situation theassured may wish to take certain steps to preserve or protect the resfrom further damage. If he does so, he runs the risk of being treatedby the underwriter as having withdrawn or waived his notice ofabandonment. Section 62(8) provides that notice of abandonmentmay be waived by the insurer. In the same circumstances, i.e., after

55See also Templeman, supra note 14, at 222.

January 1994


the insurer has declined to accept the assured's notice, if the insurerdoes anything to preserve or prevent the property from furtherdamage his action may be considered to be a reversal of his previousrejection of the notice of abandonment. It is obvious in such situa-tions that both the assured as well as the insurer run the risk of beingprejudiced by their actions. To overcome this dilemma the typicalmarine insurance policy contains a so-called "waiver clause." Theclause usually is worded as follows:

Measures taken by the Assured or the Underwriters with the object ofsaving, protecting or recovering the subject-matter insured shall not beconsidered as a waiver or acceptance of abandonment or otherwiseprejudice the rights of either party.56

There are two elements to this clause. The first specifically states thatany action taken by the assured or the insurer is not to be construedas a waiver or acceptance of the abandonment, as the case may be.The second element is wider in scope. It provides that whateveraction is taken under the circumstances is not to "otherwise preju-dice" either party's rights.

In Robertson v. Royal Exchange Assurance Corporation,57 thevessel Tarv was abandoned to the underwriters following a stranding.The notice of abandonment was refused, whereupon the underwritersproceeded to engage salvors to refloat the vessel. The salvagecontract was entered into on a "no cure-no pay" basis, but a fixedamount was agreed to as an award if the salvage was successful. Thesalvors did not commence the salvage operations on the Tarv at thatpoint, but proceeded to salve some other stranded vessel. Eventually,however, they returned to the Tarv and successfully refloated her. Inthe interim, the vessel suffered further damage. The shipownersalleged that their interest was seriously prejudiced by the salvors, asagents of the underwriters, failing to carry out salvage operations onthe Tarv expeditiously and allowing the vessel to suffer furtherdamage. It was further alleged by the shipowners that such conductby the salvors was tantamount to an acknowledgement by theunderwriters that the vessel was a constructive total loss. The courtheld that the withdrawal of the salvors amounted to acquiescence onthe part of the underwriters with respect to the tender of abandon-ment by the assured, and ruled in favour of the plaintiff shipowners.This case illustrates the second element of the waiver clause.

56Institute Time Clauses-Hulls, Clause 13.3.57(1924) 20 Ll. L. Rep. 17.

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The first element is illustrated by Crouan v. Stanier,58 where theunderwriters refused acceptance of the notice of abandonment givenby the shipowner after the vessel had stranded in the Amazon River.The underwriters then engaged a ship repairer who successfullyrefloated the vessel. The shipowner sued the underwriters, claiming aconstructive total loss, but the action failed. The underwriters thencounterclaimed against the shipowner for the costs incurred inrefloating the vessel, alleging that under the sue and labour clause inthe policy it was the duty of the shipowner to prevent the vessel frombecoming a total loss. In the first instance, this case demonstrates theutility of the first element in the waiver clause. Even though theunderwriters took steps to preserve the vessel, such action on theirpart did not amount to a waiver of their refusal to accept the notice ofabandonment. As it turned out, the assured was unable to establishthe validity of his claim for a constructive total loss.

The second point is that the counterclaim by the underwritersagainst the shipowner also failed. Kennedy, J., held that the under-writers could not rely on the sue and labour clause to recover thecosts of refloating the vessel on the basis of an implied contract,because under the same clause the shipowner would have beenentitled to recover back from the underwriters had the shipownersued and laboured for the preservation of the res.

It is arguable that the waiver clause does not necessarily refer to awaiver of the notice of abandonment, but rather to the act ofabandonment. With reference to the wording of the waiver clause, ithas been suggested that: "[I]t would generally be difficult, in the lightof that wording, to assert that such actions following a casualtyamounted to waiver of the requirement of notice." 59

It also has been suggested in this regard that if the underwriter hasbeen made aware of the fact of the incident and of the assured'sintention to abandon the vessel, and persuades the assured not toabandon his vessel, the underwriter effectively has waived his right toa notice of abandonment.60

Quite apart from the waiver of abandonment or of the notice, theremay be certain instances where notice may not be necessary. The Actprovides in §62(7) that: "Notice of abandonment is unnecessarywhere, at the time when the assured receives information of the loss,there would be no possibility of benefit to the insurer if notice were

(1904) 1 K.B. 87.59Arnould, supra note 24, at §1270, at 1053-54.WDa Costa v. Newnham, (1788) 2 T.R. 407.

113,January 1994


given to him." From the perspective of the underwriter, if he cannotbenefit from the notice then it is "merely a vain and useless form." 61

In Rankin v. Potter,62 a vessel was chartered to carry cargo fromCalcutta to London and an insurance policy was taken out on thehomebound freight. The policy also covered the eastbound voyagefrom the United Kingdom to New Zealand. The vessel became aconstructive total loss by insured perils as a result of which the entirehomebound freight was lost. It was held that no notice of abandon-ment was necessary because there was nothing which the assuredcould abandon under the circumstances.

In The Litsion Pride,63 the assured's vessel sank in the Persian Gulfduring the Iran-Iraq war. Being in the war zone made it impossible forthe vessel to be salvaged. It was held that under the circumstances nonotice of abandonment was necessary to claim for a constructive totalloss.

D. Vesting of Property as a Consequence of Abandonment

It would appear that abandonment of the res by the assured doesnot automatically vest the property in the insurer. This question iscrucial because if there is an automatic vesting the underwriter wouldimmediately have to assume all the liabilities and obligations inciden-tal to ownership. Although the precedents on this point are far fromdefinitive, the better view appears to be that abandonment divests theassured of his proprietary interest but does not, per se, invest theunderwriter with the same. In other words, the property becomes resnullius.64 It is difficult, however, to reconcile this proposition with therule that allows the assured to rescind his notice of abandonment andclaim for a partial loss instead. 65

VDISTINCTION BETWEEN ABANDONMENT AND

SUBROGATION

The doctrine of subrogation in the law of insurance may be bestdescribed as the right of the insurer to "step into the shoes" of the

61Arnould, supra note 24, at §1268, at 1051-52.6 2See supra note 6.63 See supra note 48.64Boston Corp. v. France, Fenwick & Co., (1923) 28 Com. Cas. 367. See also other cases

cited in Arnould, supra note 24, at §§1289-90, at 1069-72.65Blane Steamships Ltd. v. Minister of Transport, (1951) 2 K.B. %5 (per Cohen, L.J.).

Vol. 25, No. 1


assured after indemnifying his loss. He then is entitled to all therights, remedies, benefits, and advantages of the assured. Thisprinciple prevents the assured from making a windfall profit out of hisloss. In the leading case of Castellain v. Preston,6 Brett, L.J., heldthat "in order to apply the doctrine of subrogation . . . the insurermust be placed in the position of the assured." He went on to say:

[T]hat as between the underwriter and the assured, the underwriter isentitled to the advantage of every right of the assured, whether suchright consists in contract, fulfiled or unfulfilled, or in remedy for tortcapable of being insisted on, or already insisted on, or in any otherright, whether by way of condition or otherwise, legal or equitable,which can be, or has been exercised or has accrued, and whether suchright could or could not be enforced by the insurer in the name of theassured by the exercise or acquiring of which right or condition the lossagainst which the assured is insured, can be, or has been diminished.67

Section 79 of the Act, which deals with subrogation, provides asfollows:

(1) Where the insurer pays for a total loss either of the whole, or in thecase of goods of any apportionable part, of the subject-matter insured,he thereupon becomes entitled to take over the interest of the insuredin whatever may remain of the subject-matter so paid for, and he isthereby subrogated to all the rights and remedies of the assured in andin respect of that subject-matter as from the time of the casualty causingthe loss.(2) Subject to the foregoing provisions, where the insurer pays for apartial loss, he acquires no title to the subject-matter insured, or suchpart of it as may remain, but he is thereupon subrogated to all rights andremedies of the assured in and in respect of the subject-matter insuredas from the time of the casualty causing the loss, in so far as the assuredhas been indemnified, according to this Act, by such payment for theloss.

By virtue of the doctrine of subrogation, therefore, the insurer,after having indemnified the assured under the policy, becomesentitled to the benefit of claim and other remedies of the assured. Inother words, the insurer acquires legal rights which are independentof the ownership of the insured property. In contrast, the doctrine ofabandonment, which occurs as a result of the constructive total loss,bestows upon the insurer the ownership of the lost property.

66(1883) 11 Q.B.D. 380, at 388 (C.A.).671d. See also Burnard v. Rodocanachi, (1882) 7 App. Cas. 333, referred to by Brett, L.J.

January 1994


The distinction between subrogation and abandonment was con-sidered in the case of Attorney-General v. Glen Line Ltd.68 In thatcase, the issue was whether the Government of the United Kingdom,as re-insurer of eighty percent of the hull policy on the vesselGlenearn, could claim from the shipowner a proportionate amount ofthe money recovered by the shipowner from the German Governmentunder a judgement of a tribunal established by the Treaty of Ver-sailles. The German Government had seized the vessel and shortlythereafter the shipowner had abandoned her to the underwriters. Aclaim for total loss was made and settled. Five years later, theGerman Government released the ship and paid to Glen Line, theowner, £136,699 as settlement for lost profits during the ship'sdetention. The insurers and the British Government contended thatthe monies were received by Glen Line as trustee for the insurers. Indeciding in favour of the shipowner, the House of Lords, per LordAtkin, noted that "confusion is often caused by not distinguishing thelegal rights given by abandonment .(Sect. 63) from the rights ofsubrogation (Sect. 79)" and held that "in respect of abandonment therights exist on a valid abandonment, whereas in respect of subroga-tion they only arise on payment .... "69

The foregoing passage was cited with approval by Diplock, J., inYorkshire Insurance Co. v. Nisbet Shipping Co. 70 In that case theassured's vessel collided with a vessel belonging to the Governmentof Canada. The insurers paid £72,000 to the assured under the policy.Subsequently, the assured, with the approval of the insurers, sued theCanadian Government in Canada and obtained a judgement inCanadian dollars, which, due to the sharp fall in the value of thepound sterling in 1949, yielded £55,000 more than the amount paid outby the insurers. The assured repaid the £72,000 but retained theexcess. The insurers claimed that they were entitled to the extra£55,000 by subrogation under the relevant statutory provision. It washeld that the assured was entitled to keep the excess. In so- holding,Diplock, J., referred to King v. Victoria Insurance Co. 7' and stressedthe point that "under the doctrine of subrogation an insurer wasentitled to recover from the assured only 'to the extent of thepayment' made to the assured by the insurer under the policy." 72

68(1930) 37 LI. L. Rep. 55.691d. at 61.70[1961] 2 All E.R. 487.71[1896] A.C. 250.71(196 1] 2 All E.R. at 493-94.

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Of course, one purpose of subrogation is to prevent the assuredfrom making a windfall profit after he has received payments from theinsurer by way of indemnification under the policy. In contrast,abandonment of the res by the assured to the insurer results in theinsurer acquiring ownership of the res. It is interesting to note that inboth the above cases the shipowner benefitted from the windfall.

VICONCLUSION

Incidents giving rise to loss and abandonment are the same today asthey were years ago. Strandings, groundings, collisions, founderings,captures, and destructions in war are just as common today as theywere during times which gave rise to the jurisprudence in this area ofthe law. Recent cases arising from occurrences, such as, for example,the Iran-Iraq war, and cases involving ships trapped in the Suez Canalduring the Arab-Israeli war, continue to invoke the classic cases ofthe past as authorities. The law of constructive total loss andabandonment will no doubt continue to challenge and inspire inno-vative legal minds as maritime events unfold and casualties continueto occur.

117January I9W4


Damages for a Charterer's Failure to Load:An Anglo-Australian Perspective

GEORGE PANAGOPOULOS*

Upon a charterer's failure to load, damages are awarded to ashipowner' so as to place it in the same position as if the contract hadbeen performed. 2 This means that the shipowner would be able torecover the net revenue under the repudiated charter. That is thegross amount of freight less the cost of earning such freight.3

The measure of damages has been expressed in three basic ways:1. Traditionally, it has been defined as the net freight subject to a

duty (of various magnitudes) to mitigate.4 This view is based on thegeneral contractual principle of a duty to mitigate.

2. More recently, the formula of net freight less any substitutefreights earned during the duration of the repudiated charter has beenseen as the appropriate measure.5

3. Today, the emerging measure of damages is that of contractfreight less market freight. This formula considers the market as themost appropriate measure for mitigable loss. 6

*B.A., LL.B. (Hons.) (Monash). Solicitor at Mallesons Stephen Jaques, Melbourne. Thisarticle is a summary of the author's thesis as part of his Honours degree at Monash University.Martin Davies, Associate Professor at Monash University, was the supervisor of the thesis andoffered valuable advice and criticism for this article.

IFor the purposes of this article, shipowner means a party contracting to supply vessels andtherefore includes a disponent owner.

2Wertheim v. Cicoutimi Pulp Co., [1911] A.C. 301; Rheinoel G.m.b.H. v. Huron LiberianCo. (The Concordia C), [1985] 2 Lloyd's Rep. 55 (Com. Ct.); Sib International S.R.L. v.Metallgesellschaft Corp. (The Noel Bay), [19891 1 Lloyd's Rep. 361 (C.A.).

3Smith v. McGuire, (1858) 3 H. & N. 564, 157 E.R. 589.41d,; Aitken Lilburn v. Ernsthausen, [1894] 1 Q.B. 773 (C.A.); Stainforth v. Lyall, (1830) 7

Bing. 169, (131) E.R. 65.5Rheinoel G.m.b.H. v. Huron Liberian Co. ('The Concordia C), supra note 2; Sib International

S.R.L. v. Metallgesellschaft Corp. (The Noel Bay), supra note 2; see also Den Norske Afrika ogAustralie Linie v. Pt. Said Salt Assoc. Ltd., (1924) 20 LI.L.Rep. 184, 186 (C.A.).

6Cobelfret (U.K.) Ltd. v. Austen & Butta (Sales) Ply. Ltd., N.S.W. Court of Appeal, 23April 1991 (unreported); Scrutton on Charterparties, art. 191 (19th ed. 1984); McGregor onDamages, para. 1155 (15th ed. 1988); see also Koch Marine Inc. v. D'Amica Societa DiNavigazione A.R.L. (The Elena D'Amico), [1980] 1 Lloyd's Rep. 75 (Com. Ct.).


Although'one could safely assert that the first of the three measuresis no longer applicable,7 it is uncertain which of the latter twoformulae is the appropriate measure. Furthermore, neither of thesetwo can accommodate consequential losses arising from contractswith optional modes of performance or placement losses.

This article will focus first on what the appropriate measure orcombination of measures is for a failure to load. It then will examinewhether in addition to damages for lost freight, consequential losses,such as demurrage and deadfreight, are recoverable. Finally, it willexamine the recovery of losses in placement.

I.

THE APPROPRIATE MEASURE

When assessing damages a general tendency has arisen to use themarket as the standard measure. The value of lost performance isassessed by reference to the difference between the market value ofthe contract and the price expressed in the contract.8 It has beensubmitted by commentators that the modem measure of damages fora failure to load is the contract rate of freight less the market rate offreight. 9 Basically it could be expressed as:

(Contract freight - costsl) - (Market freight - costs2)10

Although neat and simple, the market formula is somewhat unreal-istic. Assuming the market as perfect, it presupposes that a ship-owner can instantly earn substitute freights, for the repudiatedcharter's full duration, at the market rate. Furthermore, althoughthere will always be a market rate of freight, circumstances will arisewhere a shipowner cannot find employment for its vessels. It wouldbe inappropriate to deduct the market rate of freight in suchcircumstances.

7Scrutton on Charterparties, art. 191; McGregor on Damages, para. 1155.8J. W. Carter & D. J. Harland, Contract Law in Australia, para. 2158 (2d ed. 1991); A.G.

of the Republic of Ghana and Ghana National Petroleum Corp. v. Texaco Overseas TankshipsLtd. (The "Texaco Melbourne"), [1992] 1 Lloyd's Rep. 303 (Com. Ct.); see also LombardNorth Central Plc v. Butterworth, [19871 1 Q.B. 527, 537 (C.A.); Koch Marine Inc. v. D'AmicaSocieta Di Navigazione A.R.L. (The Elena D'Amico), supra note 6.

9Scrutton on Charterparties, Art 192; McGregor on Damages, para. 1155.10Costs generally represents the cost of earning the freight. Costsl represents the costs that

would have arisen under the primary charter. Costs2 represents those costs in earning freightunder a substitute voyage.

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In Cobelfret v. Austen & Butta Sales Pty. Ltd.II the Court of Appealof New South Wales accepted the market formula in awarding damagesfor lost freight. The Court recognised four distinct possibilities thatmight occur in the market when alternative freights are sought:

1. Other vessels were at the relevant times available for voyagecharter and substitute cargo for them was available;

2. Other vessels were available for voyage charter and no substi-tute use for them was then available;

3. No other vessels were available for voyage charter but substi-tute use for them was available;

4. No other vessels were available for charter and there was nosubstitute use for them to be put to had they been available. 12

Situations (2) and (4) above deal with the problem where a shipownercannot find substitute employment for its vessels. However, the casedid not address the problem which arises where the substituteemployment found is not for the repudiated charter's full duration ornot at the full market rate of freight.

1. The correct measure

In Cobelfret the plaintiff shipowner, Cobelfret, had entered intosuccessive contracts of affreightment with the defendant for thecarriage of coal from New South Wales to Europe. The quantity ofcoal the defendant could lawfully export had been reduced owing toindustrial trouble, inadequate coal loading facilities and the adoptionof export restrictions by the Joint Coal Board. Among other damages,Cobelfret claimed freight for the cargo it would have carried underone of the contracts of affreightment if it had been fully performed.

In awarding damages the New South Wales Court of Appeal did notuniversally apply the market formula as the measure of damages for afailure to load. It applied it only to the theoretical13 voyages that wouldhave been performed by vessels which the shipowner did not own or haveon time charter. For such vessels, Cobelfret could not be expected tohave found substitute voyages. The true loss therefore was the contractfreight less the market freight at the time of the intended voyage.14

11N.S.W. Court of Appeal, 23 April 1991 (unreported).12At page 46 of the transcript.

3aTese are the voyages that would have occurred if the contract had been fully performed.M4Assumedly the market freight would have fallen considerably given the adoption of export

restrictions by the Joint Coal Board, meaning that there was little demand for vessels seeking that

Failure to Load 121January 1994


Damages were not awarded for the two theoretical voyages theplaintiff would have made with vessels it owned or had on time-charter. The market formula could not apply as the plaintiff had failedin its onus of proving what damages should be awarded. It had notallowed for the profits those ships would have made once releasedfrom the contract of affreightment. For the plaintiff to recover the fullnet contract freight it had to show that no substitute employment wasavailable for its vessels. Although it had shown that during therelevant period there was an oversupply of vessels, akin to Cobel-fret's time-chartered vessels, it had failed to show that there was nocargo available for them. Thus, the court held, Cobelfret had notshown that it fell within situation (2) above, as opposed to situation(1).

In adopting the market formula, the New South Wales Court ofAppeal did not seek to depart from or distinguish cases which appliedthe net contract freight less net substitute freight formula such as theNoel Bay15 or the Concordia C.16 In fact, it referred with approval tothe latter. It is submitted that both the second and third measure areapplicable according to the circumstances of the case.

a. Vessels not in shipowner's disposition

According to Cobelfret, the market formula applies where thevessel that was to be used for the repudiated charter was not in theshipowner's disposition. This occurs where the shipowner hadplanned to charter in a vessel on the spot market to fulfill itscontractual obligations. In such situations the shipowner could not beexpected to find substitute employment. The market formula's appli-cation is quite straightforward as the cost element in calculating thenet contract freight and the net market freight is the same. Such costis that of chartering the vessel.

Although there will always be a market rate of freight, there will becircumstances where a shipowner cannot find employment for itsvessel. It would be inappropriate to deduct the market freight in suchcircumstances. The court in Cobelfret recognised this in its fourpossibilities of what might occur in the market. In situations (2) and(4) where there are no available cargoes, employment will be unavail-

type of employment. Furthermore, it was found by the court that there was an oversupply of suchvessels in the market at that time, thus also contributing to the lowering of the market rate.

15Sib International S.R.L. v. Metallgeselischaft Corp. (The Noel Bay), supra note 2.16 Rheinoel G.m.b.H. v. Huron Liberian Co. (The Concordia C), supra note 2.

Vol. 25, No. 1

able. If the shipowner can show that situations (2) or (4) apply, then themarket freight will not be subtracted as, in the words of Priestley JA,there is only "one profit" 17 available, that of the contract. Yet, the courtdid not clarify exactly when there is "no substitute use" for vessels.

The market formula will not apply where the market rate of freightfalls lower than the cost of earning freight. In such a case theshipowner will receive the difference between contract freight andcosts. 18 If the market formula applied the shipowner would be placedin a better position than if the contract had been performed. 19

b. Vessels which are in the shipowner's disposition

The question to be asked is what happens in cases where, upon acharterer's repudiation, the shipowner, having ships in its disposi-tion, finds and enters into substitute voyages? Does the marketformula or does the second measure, that of net contract freight lessnet substitute freight, apply in such circumstances? Cobeifret leavesthis somewhat unanswered.

It could be submitted that the market formula is now the applicableview. Therefore, there would be no need to calculate and subtractsubstitute freights. It would follow that the shipowner could keep anyfreights earned.

For example, if a shipowner had contracted at $15 per ton, with thecosts of running its own ship at $10 per ton, the shipowner wouldhave earned $5 per ton profit. If the market freight at that particulartime was $12 per ton, then in ordinary situations, where the chartererfailed to load, the shipowner will recover $3 per ton; e.g., thedifference between the net contract and market freights:

D = ${(15 - 10) - (12 - 10)}.= $5 - 2 per ton.= $3 per ton.

17Supra note 12.18Andrew Weir v. Dobell, [1916] 1 K.B. 722.'91n Andrew Weir v. Dobell, id., the plaintiffs chartered in a vessel for a voyage at 21s per

ton. They then sub-chartered this to the defendants at 28s. 6d. per ton. The defendants refusedto load. It was held that the plaintiffs could not recover the difference between the contractfreight of 28s. 6d. per ton and the market freight of 17s. per ton. Being able to cancel the originalcharterparty, the plaintiffs were not expected to put the ship on the market (thereby earning 17s.per ton) but to cancel the charterparty and save 21s. per ton. Therefore the plaintiffs' true losswas 7s. 6d, that is the difference between the contract freight and the cost. If the plaintiffs hadbeen awarded the difference between the contract freight and market freight, they would haverecovered more than they would have earned under the repudiated voyage.



In this example the shipowner has earned $2 per ton less than if thecontract had gone ahead. This $2 shortfall would be earned by puttingthe vessel on the market at $12 per ton and earning $2 per ton net profit.

What happens if the prudent shipowner earns more on the substi-tute voyage than the market would pay?

If in the above example, the shipowner who contracted at $15 perton enters a substitute charter at $14 per ton,20 will it recover $3 perton under the market formula in addition to the $4 per ton net profitunder the substitute charter? This would give the shipowner a netprofit of $7 per ton.

Alternatively, if the shipowner only finds freight at $11 per ton, onthe spot market, even though the going market rate was $12 per ton,should not $4 per ton be recovered? Will the shipowner merelyrecover $3 per ton under the market formula and be penalised $1 perton for not finding a substitute freight at the full market rate?

Although, according to McGregor, the "normal measure of dam-ages" today is "contract rate of freight less the market rate offreight," 21 it would be inappropriate to apply it in cases where theshipowner does find alternative employment. Clearly, the best indi-cation of the market rate is any substitute employment found. 22 Thecourts should not axiomatically use the "market" freight as themeasure where substitute employment has been found.

Furthermore, although the shipowner may realistically find substi-tute employment for the vessel at the market rate of freight, thisemployment may only cover a portion of the primary charter'sduration. For example, if laytime for loading under the primarycharter was to commence on January 1st and laytime for dischargingwas expected to have finished by January 31st, realistically theshipowner might not find alternative employment until well intoJanuary. In both The Noel Bay and The Concordia C, the substitutevoyage did not cover the primary charter's entire duration.

There is no indication in Cobelfret whether the plaintiff hadexecuted substitute voyages for the vessels in its disposition. It couldbe safely assumed that it had not, 23 which would also explain why it

2This would be possible, for example, if the shipowner had already entered this contract at$14 per ton intending to charter in a vessel. Upon the repudiation of the charter at $15 per ton,the shipowner uses this vessel for the substitute voyage.

21McGregor on Damages, para. 1155.22Sib International S.R.L. v. Metallgesellschaft Corp. (The Noel Bay), supra note 2, [1989]

1 Lloyd's Rep. at 366 (per Staughton L.J.).23The effect of the quota system would suggest that contracts for the carriage of coal would

have been scarce.

Vol. 25, No. 1

sought to establish that no alternative freight could have been earned.It follows that the market formula was sought to be applied as analternative to situations where the shipowner has obtained substitutevoyages.

2. Conclusion with respect to direct damages

It is submitted that where a charterer fails to load, the shipowner'scorrect measure of damages is the profit that would have been madeunder the repudiated charter, less the profit that could have beenearned throughout such charter's duration. Substitute employment,throughout the repudiated charter's duration, is prima facie evidenceof the profit that could have been earned. In cases where theshipowner did not make a substitute profit, the market rate of freightrepresents what could have been earned in this period.

II.RECOVERING CONSEQUENTIAL LOSSES: DEMURRAGE

AND DEADFREIGHT

So far the appropriate measure of a shipowner's damages for lostfreight where a charterer fails to load has been examined. However,damages for lost freight do not truly put the shipowner in the sameposition that it would have occupied if the contract had beenperformed. This is particularly so where there are optional modes ofperforming the contract. In such a case, if the charterparty orcontract of affreightment had gone ahead the shipowner may haveearned demurrage and deadfreight. By not going ahead with itscontractual obligations the charterer has denied the shipowner suchan opportunity.

Suppose a voyage charterparty provided a fixed laytime of threerunning days. Laytime was to commence upon the acceptance ofnotice of readiness. Notice of readiness was given on Friday at 17:00.Saturday and Sunday were non-working days, whilst Monday was apublic holiday. If the charterer indicated at 17:01 that it would beunable to load and the shipowner accepted this as repudiation, itcould be found as a question of fact that the loading would haveoccurred after the laytime period. Therefore, from Tuesday onwards,demurrage would have been payable. In this example, it is inevitablethat the shipowner would have earned demurrage.

Deadfreight, however, will only be recoverable by a shipowner asa consequential loss for failing to load where the failure to load



occurred in a contract of affreightment without a specified number ofliftings.24

Although it may be hypothesized that in a given unperformedcontract demurrage and deadfreight would have been incurred, thereare problems in awarding such consequential damages. First, there isno clear authority on whether a shipowner can recover lost demur-rage and deadfreight where there has been a failure to load. Secondly,even if, in principle, such damages can be awarded, there are inherentproblems of quantification.

1. Are consequential losses recoverable?

The authorities are unclear as to whether a shipowner may recoverconsequential losses arising from a charterer failing to load.

In Reidar v. Arcos25 the charterer exceeded the laytime, anddemurrage became payable. Had the ship been loaded within thefixed time the summer cargo would have been loaded. However bythe time she was loaded she could only lawfully carry to the UnitedKingdom a smaller winter cargo. The Court of Appeal upheld the trialjudge's decision allowing the owner to recover, in addition todemurrage at the fixed rate, the difference between the summer andwinter cargoes. Thus, for detaining the vessel beyond the agreedtime, damages in addition to the agreed demurrage rate were payableby the charterer. Such damages were for the consequential loss offreight in failing to load a full and complete cargo.

In The Altus 26 the converse occurred. In addition to claimingdeadfreight, the owner contended that demurrage was payable by thecharterer for failing to load the minimum contractual cargo. Thedefendant had agreed to load a minimum of 40,000 tons of crude oil.In breach of this it loaded 34,447 tons. It paid deadfreight for thisdifference. However, under the charterparty the demurrage rate wasdependent on the amount loaded. If 40,000 tons had been loaded the

24 1t would be inappropriate to award deadfreight as a consequential form of loss where a

charterer fails to load in either a voyage charterparty or a contract of affreightment with aspecified number of liftings. This is because where damages are awarded for a failure to load,it is assumed that a full cargo, or at least the minimum contractual cargo, had been loaded. Ifa full cargo had been loaded the shipowner could not have earned deadfreight. However, in thesituation of a contract of affreightment without a specified number of liftings, the shipownercould have earned the full freight and deadfreight. See L. Gorton & R. Ihre, Contracts ofAffreightment and Hybrid Contracts 25, 37 (1986).

25(1926) 25 Lloyd's Rep. 513, [1927] 1 K.B. 352 (C.A.).2 6Total Transport Corp. of Panama v. Amoco Transport Co., [1985] 1 Lloyd's Rep. 423

(Com. Ct.).

Val. 25, No. I

Failure to Load 127

demurrage rate would have been significantly higher than it in factwas.

In holding that the lost demurrage was recoverable, Webster J.closely examined Reidar v. Arcos so as to decide whether therecovery of both deadfreight and demurrage required two distinctbreaches. His Honour found that the majority in Reidar v. Arcos hadheld that the charterer had committed one breach 27 giving the ownertwo distinct claims.28 He stated the ratio of Reidar v. Arcos as:

Where a charterer commits any breach, even if it is only one breach, ofhis obligation either to provide the minimum contractual load or todetain the vessel for no longer than the stipulated period, the owner isentitled not only to the liquidated damages directly recoverable for thebreach of the obligation to load (deadfreight) or for the breach of theobligation with regard to detention (demurrage), but also for, in the firstcase, to the damages flowing indirectly or consequentially from anydetention of the vessel (if it occurs) and, in the second case, to damagesflowing indirectly or consequentially from any failure to load a com-plete cargo if there is such a failure. 29

Applying this ratio Webster J. was able to hold that in addition to thedeadfreight already received, the owner was entitled to the demur-rage rate difference consequent upon the charterer's failure to loadthe minimum agreed cargo.

The Altus would seem favourable to a shipowner in the situationunder consideration here. Even where there is only one breach, thatof failing to load, the owner could recover damages for lost demur-rage or deadfreight where they flow "indirectly or consequentially"from the breach. The reference to "any failure to load a completecargo" is broad enough to include a complete failure to load.

The charterer could distinguish the cases of Reidar v. Arcos andThe Altus from a situation where there has been a complete failure toload. If these cases were to be restricted to their particular facts, theyapply only where consequential damages are recovered in addition toliquidated damages. In the "failure to load a complete cargo"situation, a shipowner would seek to recover consequential losses,such as demurrage, in addition to lost freight. The latter does notamount to liquidated damages.

27According to Bankes L.J. the charterers had failed to load at the stipulated rate, whilstaccording to Atkin L.J. they had failed to load a full cargo within the laydays.

28[1985] 1 Lloyd's Rep. 423, 435.29 d.

January 1994


However, it seems to be irrelevant whether the damages flowingdirectly from the breach are liquidated or not. Webster J. awardedthese damages independently of the nature of the deadfreight dam-ages. 30 Demurrage is recoverable in addition to damages for lostfreight despite the fact that the latter are not liquidated damages. It issubmitted that consequential losses are recoverable if they flow"indirectly or consequentially" from the breach of failing to load.3'

Although the cases mentioned are favourable to a shipowner, theydid not deal with a complete failure to load. Rather, they wereconcerned with situations where the contractual minimum was notloaded. The actual voyages still went ahead. The case of the NoelBay32 may be more relevant. The parties had agreed to carry gasoilunder a voyage charterparty. The charterer failed to nominate a portin breach of the agreement. After receiving notice that the chartererwas withdrawing from the contract, the owner accepted such conductas repudiatory and entered a substitute voyage.

The owner claimed demurrage in addition to the profit lost. Suchclaim was based on the owner's allegation that 72 hours would havebeen consumed in addition to the four and a half days spent waitingfor orders. The Court of Appeal held that three days lost demurragewas not recoverable. However, no clear principle can be discernedfrom the case.

According to Staughton L.J., the owner was entitled to damagesfor the vessel's delay. However, as the voyage had not gone ahead,the fixed demurrage rate was not applicable. Damages for delay wereto be assessed at the market rate. The market rate of the vessel wasthat which was earned under the substitute employment. Thus, thedamages for delay were extinguished by the charterer's entitlement tocredit at the same rate. 33

The majority of Stocker and Balcombe L.JJ. did not agree with thisreasoning. They reasoned that, as the owner had merely pleadeddamages for repudiation of the charterparty, it could not recover thedemurrage claim. A breach of the obligation to nominate a port,which gave rise to damages for detention, was not pleaded at anypoint in the proceedings. On this basis, the trial judge was correct insaying that the owner had suffered no loss beyond the lost freight.34

301d.31See Richco International Ltd. v. Alfred C. Toepfer International G.m.b.H. (The Bonde),

(1991] 1 Lloyd's Rep. 136 (Com. Ct.).32SIB International S.R.L. v. Metallgesellschaft Corp. (The Noel Bay), supra note 2.331d. at 365.34Id. at 368.

Vol. 25, No. 1

Arguably, the majority would have awarded damages for lost demur-rage had it been pleaded.

The Noel Bay essentially dealt with a situation where demurragewould have been recoverable as arising from a breach independent ofthe failure to load. That is, as arising from an alleged breach of theobligation to nominate a port. Yet, the vessel's delay, for whichdemurrage would have been recoverable, would have only arisenafter the shipowner's acceptance of the charterer's conduct asrepudiatory. Had the delay arisen whilst the contract was still on foot,then it would be appropriate to speak in terms of an independentbreach. As it did not, the demurrage should have been claimed as aconsequential loss arising from the failure to load. This wouldovercome Staughton L.J.'s difficulty with awarding damages fordetention at the demurrage rate when there was no voyage.

Upon the facts of The Noel Bay, it is certain that some demurragewould have resulted if the voyage had gone ahead. With respect, themajority erred in suggesting that a breach of the obligation tonominate a port should have been pleaded. Such a breach (in thosecircumstances) would have only given rise to damages for detentionand not demurrage. What the shipowner should have claimed, at leastin the alternative, is that the demurrage was a consequential lossstemming from the failure to provide a cargo, as per The Altus.Neither this case nor its predecessors were mentioned in The NoelBay. It can only be speculated whether a different outcome wouldhave resulted if the owner had pleaded the lost demurrage as aconsequential loss. It is submitted that consequential losses for afailure to load are recoverable. This is particularly so where it isinevitable that some demurrage or deadfreight would have beenincurred.

2. The charterer's arguments against recovery

Where there are optional modes of performance, so that thecontract might be performed in several ways, the outcome which isleast profitable to the plaintiff, and least burthensome to the defend-ant, is adopted by the courts. 35 The charterer, as defendant, couldseek to extend this principle to cover consequential losses. As it

35Cockburn v. Alexander, (1848) 6 C.B. 791, 814; Kaye S. S. Co. v. Barnett, (1931) 41LI.L.R. 231, 239; Maredelanto Compania Naviera SA v. Bergbau-Handel G.m.b.H. (TheMihalis Angelos), [1971] 1 Q.B. 164; TCN Channel 9 Pty. Ltd. v. Hayden Productions Pty.Ltd., (1989) 16 N.S.W.L.R. 130 (N.S.W.C.A.).

Failure to Load 129Jauary I994


cannot be said for certain that demurrage or deadfreight would havebeen incurred, damages should be assessed on the outcome that isleast burthensome to the defendant. Such an outcome would ignorethe incursion of demurrage or deadfreight.. However, this principle is unlikely to be extended. It applies where

the outcome of a contract is dependent on the exercise of an optionunder the contract. It seeks to impose damages on the defendant nogreater than the minimum the defendant could legally have paid underthe contract. It would apply, for example, in cases where there is anoptional minimum/maximum range of cargo to be loaded in a contractof affreightment. Thus, in an action for non-delivery of 200 tons, 5%more or less, the seller was liable on the assumption that 190 tons hadbeen delivered. 36 The courts award damages to a shipowner for afailure to load or deliver on the assumption that the charterer wouldhave loaded the smallest contractual cargo.

It is submitted that the principle's true scope is restricted to wherethe defendant is given alternative modes of performance under thecontract. 37 Thus, this argument is unlikely to assist a defaultingcharterer. At any rate, the principle of awarding damages upon theoutcome least burthensome to the defendant will not apply indisregard to the facts of any situation.38

3. The quantification of consequential losses

Even if consequential losses such as demurrage and deadfreight arerecoverable in principle, a charterer could argue that the inherentproblem of quantification would bar such recovery. Although ashipowner may show that some demurrage would have been in-curred, often its extent will not be accurately determinable. This isfurther complicated if one considers that standard charterpartiesoften fix the amount of demurrage at a specified sum per day and prorata for part of a day. 39

In awarding damages for consequential losses, the court could,depending on the circumstances, adopt one of two basic approaches:

(a) Approximate the amount of demurrage or deadfreight thatwould have been earned; or

36Re Thornett & Fehr, [1921] 1 K.B. 219.37Maredelanto Compania Naviera SA v. Bergbau-Handel G.m.b.H. (The Mihalis Angelos),

[1971] 1 Q.B. 164; TCN Channel 9 Pty. Ltd. v. Hayden Productions Pty. Ltd., supra note 35,16 N.S.W.L.R. at 130, 150, 154.

3 8TCN Channel 9 v. Hayden Productions, supra note 35.39See Clause 7 of the Gencon form.

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Failure to Load 131

(b) Award the shipowner an amount for losing the opportunity toearn demurrage or deadfreight.

The first approach would be employed in situations where the courthas objective criteria before it so it is able to approximate the amountof demurrage or deadfreight. The second approach would applywhere there is no means of calculating the potential deadfreight ordemurrage that would have been earned.

a. Approximation of the consequential loss

The court may have circumstances before it which enable it toestimate the amount of demurrage or deadfreight that the shipownerwould have earned. This is particularly so in contracts of affreight-ment that have been repudiated half-way. That is where a significantnumber of liftings under a contract of affreightment have gone ahead,but the charterer has failed to provide cargo for the remaining liftings.Definite evidence exists of the demurrage and/or deadfreight that wasincurred in the executed liftings. The court could assume that theunexecuted part of the contract would have been performed in a likemanner. Thus, if eight liftings had been completed before the char-terer repudiated, and several more were still to be performed, thecourt could calculate a figure representing the average demurrage ordeadfreight per lifting. The shipowner would be awarded such a figurefor every outstanding lifting, as well as lost freight.

In Cobelfret4 the Court -of Appeal of New South Wales adoptedsuch an approach. The defendant had failed to supply the remainingcargo of 226,000 tonnes, during the contract's first period, due to anexport restriction. The plaintiff, on appeal, argued that it would havecarried the 226,000 tonnes in four voyages and not in five. If the cargohad been carried in five voyages, the plaintiff would have carried anaverage of 45,200 tonnes per lifting and thus have made a loss. If,however, the plaintiff had carried 56,500 tonnes per lifting, the cargowould have been carried in four liftings and it would have made asmall profit. This was essential to the plaintiff's case as the trial judgehad deducted the hypothetical losses in the first period from theplaintiff's claim regarding the second and third period.

In holding that five and not four theoretical voyages would haveoccurred, the court looked at the amounts actually carried during thefirst period. Omitting the smallest lifting, it arrived at an average of

4°Supra note 11.

January 1I9W


50,333 tonnes per voyage. Thus, the court held that the trial judge wasright in rejecting the contention that the uncarried cargo would havebeen carried in four 56,500 tonne liftings.

It follows that where a contract of affreightment is repudiatedhalf-way, the court can award lost demurrage and deadfreight to theshipowner by ascertaining the average incurred per voyage. Cer-tainly, Cobelfret could be authority for the proposition that the courtis to use the voyages executed under a contract of affreightment asevidence of what, on the balance of probabilities, would haveoccurred if the contract had been fully performed.

b. Sum representing lost opportunity

The court may recognize that the shipowner's loss was not the lostdemurrage and deadfreight per se, but rather the opportunity to earnthem. This may be particularly so where it is uncertain how muchdemurrage or deadfreight would have been incurred. In such circum-stances it would be more appropriate for the court to award to theshipowner a sum representing this lost opportunity.

(i) Nominal damages

A nominal amount could be awarded to cover this lost opportunity.Beside cases where there is injuria or wrong without loss or damage,nominal damages are also awarded where loss is shown but evidenceas to its amount is not.41 Similarly, nominal damages are awardedwhere the plaintiff's loss is so dependent on a person's discretion ora contingency that it is impossible to say that there has been anyassessable loss. The plaintiff will only receive nominal damages. 42

However a shipowner would want to recover substantial damages forthis lost opportunity.

(ii) Uncertainty in measuring loss

There is authority to suggest that where it is clear that somepecuniary loss was suffered but its extent is uncertain, the plaintiffshould not be deprived of substantial damages. The guiding principleis that "the fact that damages cannot be assessed with certainty doesnot relieve the wrong-doer of the necessity of paying damages for his

41Dixon v. Deveridge, (1825) 2 C. & P. 109; Twyman v. Knowles, (1853) 13 C.B. 222.42Fink v. Fink, (1946) 74 C.L.R. 127 (H.C.A.).

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breach of contract." 43 Thus, where a seller delivered defective goods,the fact that it was impossible to accurately measure the level ofmarket diminution did not prevent the plaintiff from recoveringsubstantial damages in Biggin v. Permanite."

In a case where it seems inevitable that some demurrage ordeadfreight would have been incurred, the impossibility of accuratelyquantifying it should not bar the shipowner from recovering. InBiggin v. Permanite, in the absence of precise evidence, Devlin J.estimated what he thought "the value of the goods would have been... if they had been sold with all faults." 45 Such an approach hadalso found approval in the joint judgment of Dixon and McTiernanJ.J. in Fink v. Fink. Their Honours said that:

[w]here there has been an actual loss of some sort, the common lawdoes not permit difficulties of estimating the loss in money to defeat theonly remedy it provided for breach of contract, an award of damages. 47

In Chaplin v. Hicks8 Fletcher Moulton L.J. said that:

where it is clear that there has been actual loss resulting from thebreach of contract, which it is difficult to estimate in money, it is for thejury to do their best to estimate; it is not necessary that there should bean absolute measure of damages in each case.49

The court therefore must, upon the available facts, determine thedamages as best it can by arriving at a figure which represents theloss. In the case of a voyage charterparty, for example, if evidence ofcircumstances such as port congestion, public holidays, or strikesmake it clear that the charterers would have gone well beyond thelaytime period the shipowner could recover an approximate sum.

(iii) Loss of a chance

In situations where it is difficult to categorically say that demurrageor deadfreight would have been incurred, the shipowner's true loss is

43Chaplin v. Hicks, [1911] 2 K.B. 786, 792 (C.A.); Howe v. Teefy, (1927) 27 N.S.W.L.R.301, 306 (N.S.W.C.A.); see also Hardware Services Pty.-Ltd. v. Primac Association Ltd.,[1988] 1 Qd. R. 393 (Qd.S.C.).

441951] 1 K.B. 422, rev'd on other grounds, [1951] 2 K.B. 314 (C.A.).45Id. at 439.46(1946) 74 C.L.R. 127 (H.C.A.); see also The Commonwealth v. Amann Aviation Pty. Ltd.,

(1991) 174 C.L.R. 64 (H.C.A.).47(1946) 74 C.L.R. 127, 143.48[1911] 2 K.B. 786 (C.A.).49Id. at 795.

January I994


the chance to earn them. Where denied potential benefits as a resultof the defendant's breach, a plaintiff may receive damages represent-ing this lost chance. 50 The court must award damages according to itsestimation of the plaintiff's chance of obtaining such benefits. Thiscreates difficulties in quantification. Yet, such difficulties are no basisfor denying the plaintiff a substantial recovery.

In Chaplin v. Hicks5l the Court of Appeal upheld a jury's award of£100 to the plaintiff for being deprived of a chance to compete in acontest. The court accepted that the plaintiffs chance of winning theprize was dependent on a contingency. However, according toVaughan Williams L.J., this was not to say that "damages areunassessable merely because certainty is impossible of attain-ment. ' ' 52 It is only "whenever the contingencies on which the resultdepends are numerous and difficult to deal with" 53 or where "dam-ages might be so unassessable that the doctrine of averages would beinapplicable" 54 that the plaintiff would be denied recovery.

The decision of Chaplin v. Hicks was adopted by the full court ofthe Supreme Court of New South Wales in Howe v. Teefy. 55 There,a race horse was leased by the defendant to the plaintiff, who was atrainer, for three years. After three months, the defendant removedthe horse from the plaintiff in breach of the contract. The plaintiffclaimed for the earnings he would have made out of the horse's prizemoney, from betting on the horse and from supplying information toother people. The jury awarded the plaintiff £250.

The Supreme Court of New South Wales unanimously upheld thejury's award. Street C.J., with whom Gordon and Campbell J.J.concurred, said that the plaintiff's "injury which he sustained was thedeprivation of his right under his agreement to train and race thehorse, and make what profit he could out of doing so. "56

Following Chaplin v. Hicks, the court in Howe v. Teefy recognisedthat difficulties or uncertainty in assessing damages are no groundsfor denying recovery. 57 In both these cases there is a notion thatdamages in such situations are to be assessed for losing a right or

5°Richardson v. Mellish, (1824) 2 Bing. 229, 239, 130 E.R. 294, 298; Chaplin v. Hicks, [19111

2 K.B. 786, 792 (C.A.); Howe v. Teefy, (1927) 27 N.S.W.L.R. 301, 306 (N.S.W.C.A.); TheCommonwealth v. Amann Aviation Pty. Ltd., supra note 46.

5 1Supra note 48.52(1911] 2 K.B. at 792.53 1d. at 791.54Id. at 792.55(1927) 27 N.S.W.L.R. 301 (N.S.W.C.A.).6Id. at 307.

571d. at 306.

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opportunity. Although neither court actually assessed damages,indications were given as to how a court should assess such damages.The common thread through these cases is that damages shouldreflect the loss of the right or chance to make a profit.

Vaughan Williams L.J. in Chaplin v. Hicks said that although thecompetitor could not have gone into the market and sold her right tocompete, the jury "might well take the view that such a right, if itcould have been transferred, would have been of such a value ...that a good price could be obtained for it."58 More significantly,Street C.J. said in Howe v. Teefy that:

[t]he calculation which they [the jury] had to make was not how muchhe would probably have made in the shape of profit out of his use of thehorse, but how much his chance of making that profit, by having the useof the horse, was worth in money. 59

In Kerry v. Spriggs6° on similar facts to Howe v. Teefy, the defendantwrongfully repossessed a racing horse leased to the plaintiff for twoyears. The plaintiff claimed $60,000 on the basis that the horse hadgreat potential and that this is what he could have earned had he beenallowed to continue with his contract. Hammond J. found that thehorse's performance had been declining and thus doubted that itwould have earned this amount. He awarded $5,000 as representingthe loss of opportunity to train the horse for reward. 61 Thus, despitea finding that the horse would not have earned the amount claimed, inthe spirit of Howe v. Teefy and Chaplin v. Hicks, Hammond J.awarded damages for the lost opportunity.

It would follow that where a charterer fails to load and it cannot beshown on the balance of probabilities that demurrage or deadfreightwould have been incurred, the shipowner has still lost something ofvalue. It has lost the chance or right to earn demurrage or deadfreight.Damages for such loss would not be assessed on the monetary basisof the amount that might have been earned. Instead, damages are tobe assessed reflecting that lost right or opportunity.

c. Conclusion: recovering for lost opportunity

The situation regarding recovering damages for a lost opportunity couldbe summarized as follows. Where, on the balance of probabilities,

58[1911] 2 K.B. 786, 793.59(1927) 27 N.S.W.L.R. 301, 307 (N.S.W.C.A.).60[ 19 8 9] 5 S.R.(W.A.) 273 (Dist. Ct.).611d. at 278.

Januafy I N4


demurrage or deadfreight would have been incurred, the shipowner canrecover for such loss even though its extent is uncertain. The court must,upon the evidence, estimate the damages as best it can.

In a situation where it cannot be said that demurrage or deadfreightwould have been incurred, the shipowner has lost the right oropportunity to earn either. Such right or opportunity has monetaryvalue. Yet, this monetary value will not reflect the loss of what theshipowner might have earned. Rather, it will reflect the value of thelost right or opportunity.

III.RECOVERING LOSSES IN PLACEMENT

Ordinarily, a shipowner does not enter into charterparties inisolation. Instead, it plans ahead for its vessels. Subsequent chartersto be performed upon the completion of a voyage are secured. Upona charterer's failure to load, any employment the vessel was toengage in after the completion of the repudiated charter may beimpossible or unprofitable to. perform.

A shipowner may seek to recover damages for this placement loss.The charterer would argue that any loss of future employment is notconnected to the contract breached and therefore too remote. Recov-ery for lost future employment, contingent upon the due performanceof the repudiated charter, will therefore depend on the concept ofremoteness of damage.

1. Remoteness of damage

Upon a breach of contract, damages will be recoverable if the partyin breach could reasonably have contemplated that the breach wasnot unlikely to cause the damage, or that the damage was liable toresult from the breach or was a serious possibility or a real danger. 62

Communications of special circumstances, by one party to another,allow recovery for losses that ordinarily may not have been within theparties' reasonable contemplation. The special circumstances com-municated alter the types of losses the parties might reasonably

62Hadley v. Baxendale, (1854) 9 Exch. 341; Koufos v. Czarnikow, [1969] 1 A.C. 350 (H.L.),per Lord Reid at 385-386, per Lord Hodson at 411, per Lord Pearce at 415, and per Lord Upjohnat 425; Wenham v. Ella, (1972) 127 C.L.R. 454 (H.C.A.); Alexander v. Cambridge Credit Corp.Ltd., (1987) 9 N.S.W.L.R. 310 (N.S.W.C.A.); Burns v. M.A.N. Automotive, (1986) 161 C.L.R.653 (H.C.A.); Scrutton on Charterparties, art. 191 (19th ed. 1984).

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Failure to Load 137

contemplate. 63 They "extend the horizon to include losses that areoutside the natural course of events." 64 Thus, in a case where acharterer has failed to load a cargo from Newcastle to North Europe,the shipowner's communication of the existence a contingent subse-quent charter from Europe to New Zealand may alter what types oflosses were in the parties' contemplation.

2. Recovering placement losses

a. In ordinary cases

A shipowner will be allowed to recover a placement loss, if the losswas one which the charterer should have reasonably contemplated asnot-unlikely, liable to result, a serious possibility or a real danger. Inessence, damages will be limited to what was in the contemplation ofthe parties. 65

A charterer knows that vessels are used for profit making. Unlikemost shippers, a charterer under voyage charterparties and contractsof affreightment is usually exporting bulk cargoes. This would suggesta greater understanding of the economics of the shipping industry.Such a charterer should be able to foresee that the shipowner wouldhave entered into subsequent employment and that all did not endupon the voyage contracted. Furthermore, it should be able toforesee that such subsequent employment would be affected by itsbreach. The shipowner would lose its geographic placement andwould be unable to perform these subsequent voyages.

In the words of Lord Reid, the question to be asked is whether thecharterer would have realised, when the contract was made, thatlosses of subsequent voyages were sufficiently likely to result from itsfailure to load.66 Surely the charterer could reasonably contemplatethat its repudiation would interrupt the shipowner's scheduling andthat this would cause loss of some kind. It would be in its reasonablecontemplation that these interruptions to scheduling are "not unlike-ly"61 to cause contingent employment losses. The critical question ishow specific a loss must have been within the charterer's contempla-tion. May the loss be merely general, or must the charterer have

63Thus Lord Hodson in Koufos v. Czarnikow, supra note 62, [1969] 1 A.C. at 409, refers to"special circumstances in which the contract was made."

64Id., per Lord Pearce, at 416.

61Id. at 415-16.66Id. at 385.67

1d.

January 1994


contemplated an actual, subsequent voyage which becomes difficultor impossible to perform?

It seems that, upon the application of the remoteness principle,whether losses in subsequent employment would ordinarily be recov-ered remains somewhat unanswered. However, according to one au-thority such losses are recoverable if specifically identifiable In SpiliadaMaritime v. Louis Dreyfus6 the charterer wrongfully repudiated avoyage charterparty. The owner claimed, inter alia, damages for theexcess duration of the substitute voyage. The owner's vessel had beenemployed for some 34 days longer than it would have been on thecontractual voyage. The owner contended that if the contractual voyagehad been performed, it could have obtained a fixture for the carriage ofgrain from Brazil to Yugoslavia. It argued that it should recover thereturns from this notional, subsequent voyage from Brazil to Yugoslaviain addition to the returns from the repudiated voyage. , I- .

Having had its claims for damages dismissed at arbitration, theowner sought leave to appeal. Parker J. dismissed, noting that thearbitrators had found on the evidence that the owner could not haveobtained a fixture. Arguably, if the owner had already made acontract for carriage from Brazil to Yugoslavia the requisite evidencewould have been present.

Parker J. did say that if the arbitrators had held that, as a matter oflaw, damages arising in the period after the duration of the :contrac-tual voyage were irrecoverable, then they would have erred. Itfollows that damages arising after the contractual voyage, such aslosses in subsequent voyages, can be recovered. Although SpiliadaMaritime v. Louis Dreyfus is not solid authority, it indicates thatthere is no reason why, in principle, subsequent employment lossesshould not be recovered. Such an indication was also given in TheNoel Bay.69 Staughton L.J. recognised that a "vessel may have been[after entering a substitute voyage], better--or worse-placed forfuture employment at the end of one voyage than at the end of theother." 70 A worse placement would suggest that any future employ-ment losses should be recovered.

The owner in Spiliada Maritime v. Louis Dreyfus failed to recoveras it had been shown that it could not have obtained subsequentemployment. In cases where subsequent employment is obtainablebut its nature is uncertain, the owner would want to claim, in the

6[1983] Com. L.R. 268, (1983) 133 New L.J. 1102 (Com. Ct.).69Supra note 2.70(1989] I Lloyd's Rep. at 363.

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alternative, for the lost opportunity. Such a claim would be on thesame grounds as already examined above with respect to lostdemurrage and deadfreight.

b. Special circumstances and actual knowledge

Losses incurred in relation to subsequent voyages resulting from acharterer's default would be recoverable if special circumstanceswere communicated or actual knowledge was possessed. Such com-munications need not become a term of the contract. 7' For example,let us suppose the owner in the Louis Dreyfus case had alreadyentered into the Brazil to Yugoslavia contract. If the charterer knewof this and that it was contingent upon the performance of therepudiated voyage, then related losses would be in its contemplationas arising from its wrongful repudiation.

c. Imputed knowledge

The remaining issue to be addressed is in what circumstancesknowledge will be imputed so as to put the type of loss within thecharterer's reasonable contemplation. Both parties to a charterpartyor a contract of affreightment are usually mature, professional bodiesthat regularly deal with contracts of carriage. Certain facts andconsequences should therefore be imputed as within their knowledge.

The authorities show a trend in favor of awarding damages for lossof business or resale profits against a seller of goods but not againsta carrier or consignor.72 Lord Upjohn in Koufos v. Czarnikow73 said

a carrier of goods ... is not carrying on the same trade as the consignorof goods and his knowledge... of the other's trade may be limited andless than between buyer and seller of goods who probably know farmore about one another's business. 74

The question is to what extent the court is prepared to imputeknowledge of shipping practice and freight markets. A charterer invoyage charterparties and contracts of affreightment is to be distin-guished from an exporter (or consignor) under a bill of lading. It

71Koufos v. Czarnikow, [1969] 1 A.C. at 422.7McGregor on Damages, supra note 6, para 258.73[1969] 1 A.C. 350.741d. at 424; see also Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd., [1949] 2

K.B. 528, 537.

JAMU"I N4


usually exports bulk cargoes on a regular basis and therefore knowsmore about a shipowner's "business."

Let us suppose, for example, a charterer had entered an agreementfor the carriage of cargo from Newcastle to the west coast of India.Assuming that the west coast of India was an undesirable destination,as vessels will rarely find employment out of that region, the ownermay have accepted the fixture on the basis of a subsequent voyagefrom the Middle East back to Fremantle. If the charterer had beentold of this subsequent voyage, then losses arising from the vessel notbeing in that vicinity would be within its contemplation. The chartererwould have actual knowledge. However, what if the charterer wasnot specifically told that India was an undesirable destination? Couldsuch knowledge be imputed?

In Diamond v. Campbell-Jones75 it was said that:

a party entering into a contract must [not] be treated as havingconstructive notice of the nature of the other party's business, or of itsprobable bearing on the loss which that other party might suffer inconsequence of a breach of contract. 76

Although notice will not be imputed, the charterer will be assumed toknow certain facts. In the Victoria Laundry case77 the defendant solda boiler to the plaintiff, who operated a business as a launderer anddyer. The boiler had been damaged and the plaintiff refused to acceptit. The Court of Appeal allowed a claim for profits that would havebeen made if the boiler had been functioning properly.

The plaintiff relied on the defendant's knowledge that it was inbusiness and that it needed the boiler for its business. The courtallowed the plaintiff to recover something for the lost profits, but notthe actual profits lost, because the defendant did not know the precisenature of the boiler.

It would follow that this would apply analogously, if not a fortiori,in a voyage charter case. A charterer should appreciate the implica-tions of voyage interruptions. Where certain facts are known, subse-quent voyage losses should be awarded. Where the charterer knowsthat the destination of its cargo is undesirable to a shipowner, thennotice could be imputed, upon its repudiating a charter, that theshipowner would have made subsequent arrangements. This will beparticularly so in cases where the freight to the undesirable location

71[1961] Ch. 22.761d. at 35-36.77Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd., [1949] 2 K.B. 528.

Vol. 25, No. I

was not unreasonably high. The shipowner would only accept avoyage to such an undesirable, geographic placement at a reasonablefreight rate by securing a proximate subsequent voyage. However, ifthe freight rate to the undesirable location is particularly high, then itcould be reasonably contemplated that this is to compensate forsubsequent voyages in ballast. Thus, where special circumstances arepresent, although the nature of subsequent employment has not beencommunicated, losses arising from these subsequent voyages wouldbe in the reasonable contemplation of the charterer in default.

d. Repudiated contracts of affreightment

The principles so far deal more appropriately with placement lossesarising from repudiated voyage charterparties. Whether an ownersuffers any placement losses under a contract of affreightment willalso depend upon whether the owner was using vessels in itsdisposition.

If for example, an owner enters into a contract of affreightmentfrom Newcastle to North Europe and a consecutive one from Europeto New Zealand, the vessels would be performing a global circuit overthe various liftings. Where the Newcastle charterer repudiates thecontract of affreightment after completing two out of eight liftings, adisponent owner might not suffer any contingent losses on theremaining six voyages. This would be so if the owner was going tocharter in ships to perform these voyages and such ships were notready and earmarked. It would simply not charter in ships for thosesix, repudiated liftings. The Europe-New Zealand voyages that werecontingent on the Newcastle contract of affreightment voyages couldbe performed by chartering in vessels to do those liftings on the spotmarket in Europe, rather than chartering vessels to do both liftings.Thus, unless the disponent owner had earmarked particular ships toperform the repudiated voyages, it will not suffer any contingentvoyage losses.

In a situation where a shipowner was to use its own vessels, or hadearmarked chartered ships, it is more likely to suffer contingentlosses. The vessels that were to be used on the repudiated voyageswould enter substitute voyages. Unless the shipowner can findemployment that would relocate these vessels so as to make thecontingent voyages, it would need to charter in vessels. The losswould arise from chartering in these new vessels on the spot market.

Therefore, in a case where a contract of affreightment is repudi-ated, the remoteness question is altered somewhat. For the ship-



owner to recover the question will also turn upon whether thecharterer knew, or ought to have known, that the shipowner wasgoing to use its own ships or chartered ships that had been earmarkedfor these voyages. This is as the contingent losses can only be in thecharterer's contemplation if it had such knowledge or if it wasimputed. The charterer cannot contemplate contingent losses unlessit knew or ought to have known that vessels to be used on therepudiated voyages were owned by the shipowner or had beenspecifically earmarked for these voyages.

Presumably, in addition to knowledge of the vessels, a knowledgeof the subsequent employment would be required, as with singlevoyage charterparties. That is, a certain degree of knowledge,possessed or imputed, would be required so as to show that thecharterer could reasonably have contemplated these contingentlosses.

CONCLUSION

The measure of damages payable to a shipowner for a failure toload has progressed from the initial measures of the mid-nineteenthcentury. Whilst still purporting to place the shipowner in the positionit would have occupied if the contract had been performed, the focusof the mitigating component seems to be on what the shipownershould have earned rather than on what it did earn. With this shift inonus the measure has become pro-charterer. Yet, contrary to thischange, a shipowner would be able to recover consequential lossessuch as demurrage and deadfreight, as well as losses in placement.The shift in onus and the change in the measure of damages may havebeen offset by the availability of these further consequential claims.

Vol. 25, No. I


Further Thoughts on The Carriage of Goodsby Sea Act 1992 (UK)

BARNEY REYNOLDS*

Readers of Tim Howard's article in the January, 1993 issue of thisJournal1 will have noted the substantial change regarding title to suewhich will occur in respect of claims on bills of lading in the UnitedKingdom when disputes governed by the new Carriage of Goods bySea Act 1992 arise for resolution. But it must be borne in mind thatthe older wording controlling the transmission of the contract deriv-ing from the Bills of Lading Act 1855, now superseded in the UnitedKingdom for bills of lading issued after 16 September 1992, is stillapplicable in some form in many, if not all, common law territoriesoutside the United States (where of course a different technique forthe transmission of the right to sue was used by the Pomerene Act of1916). It is the purpose of this article to suggest that there are otherproblems which could have arisen out of the wording of the 1855 Act,beyond those which prompted the 1992 legislation; and that theseproblems could still occur in jurisdictions retaining the older form ofwording, and also, of course, in the United Kingdom until disputesunder the old legislation cease.

As is explained in Mr. Howard's article, the pressure for reform inthe United Kingdom was triggered by two pressing problems that hadmanifested themselves in litigation in England and hence affecteddealings in the market. These were, in the chronological order inwhich they attracted attention, the problem of bulk goods, and theproblem created by the situation where the goods were dealt withindependently of the bill of lading (for example because they arrivedbefore it). In both situations the linking of the transfer of the contractwith property could cause difficulties: in the first, because under theEnglish Sale of Goods Act 1979 (in effect a reenactment of a formerAct of 1893) property cannot pass in an undifferentiated part of a

*Solicitor, Clyde & Co., London.'Howard, The Carriage of Goods by Sea Act, 24 J. Mar. L. & Corn. 181 (1993).

143

144 Journal of Maritime Law and Commerce Vol. 25, No. 1

bulk, and in the second, because in such cases it may not be possibleto say that property passes by virtue of consignment or indorsementof the bill of lading. This is all explained in more detail in the relevantreport of the English and Scottish Law Commissions which ledeventually to the 1992 legislation. 2

The Carriage of Goods by Sea Act 1992 therefore alters the lawoperative in the United Kingdom so as to tie the contract of carriageto the "lawful holder" of the bill in all but a few minor instances. Itwas the policy of the draftsman that the holder of a bill should be ableto sue the carrier irrespective of whether property in the goods towhich the bill relates had actually passed to him. In general, the newapproach creates certainty and reinforces expectations.

However, as already indicated, there are other problems relating tothe transfer of the carriage contract which similarly stem from theapplication of the technique used in 1855 to the more sophisticatedand complex market dealings of the late twentieth century. Fortu-nately, these have not yet arisen, or at least have not reachedlitigation, in the United Kingdom. But they could still do so there fora considerable period, and for longer in jurisdictions retaining the1855 formula. This article will outline the nature of these otherproblems and then consider whether the new United Kingdom Actmanages to avoid them. The conclusion is that, with slight reserva-tions, it normally does, even if sometimes by accident.

The position under the 1855 regime

Situations can arise under the 1855 regime where sellers who havetransferred property and parted with the bill remain the only personsentitled to a remedy against the shipowner, because no rights havepassed to the transferee. Such sellers are the only parties who maysue for cargo damage, despite their interest in the goods havingceased when the damage occurred, and despite no longer being inpossession of the bill.

The bill of lading contract is therefore capable of becomingseparated from the holder of the bill and the person who has propertyin the goods carried. However, what is sometimes overlooked is thatit is then capable, in certain circumstances, of jumping back to its

2See the Law Commissions' Report on Rights of Suit in Respect of Carriage of Goods bySea, Law Com. No. 1%, Scot. Law Com. No. 130 (1991) (hereinafter "The Report"), andBeatson and Cooper, Rights of Suit in Respect of Carriage of Goods by Sea, [1991] Lloyd'sMar. & Com. L.Q. 1%.

Carriage of Goods by Sea Act 1992

more appropriate position between bill of lading holder and carrier;and that it may subsequently become separated again.

These anomalies spring from the wording of § 1 of the 1855 Act. By§ 1, all the rights which arise from the contract contained in the bill oflading are transferred to, and a set of identical liabilities created in, aconsignee or indorsee of the bill if the consignment or indorsementplays an "essential causal part" 3 in the passing of property. This rulewill be satisfied when property passes from seller to buyer inaccordance with the contract, on payment against documents, andalso in a far wider (but generally "causal") range of circumstanceswhich are harder to categorise and/or specifically outline. It wouldalso appear that if the seller (not being the buyer's agent) initiallytakes the bill to the buyer's order and immediately transfers the bill tothe buyer, the seller waives any right to reserve property, so thatproperty then passes on consignment.

However, if for some reason property does not pass in accordancewith § 1, the rights of action and the liabilities under the bill of ladingcontract do not either. This is often the case, for instance, whereproperty passes to the buyer by manifested intention (other than bytransfer of the bill) when the goods are afloat, or by physical deliveryfrom the ship at the end of the voyage. This is so because in neithercase does property normally pass by virtue of dealings with the bill oflading, nor does the transfer of the bill ordinarily play an "essentialcausal part" 4 in the passing of property. In addition, rights of actionmay well not pass where the seller keeps for security a bill of ladingmade out to the buyer, since in that situation it is arguable he is notpassing property on consignment, and because the bill is made out tothe buyer, he has no power to endorse it. If he later transfers it onpayment, § 1 cannot apply and again it would seem that the contractis not transferred.

The § 1 regime thus permits, in significant instances, the detach-ment of property and the holding of the bill from the rights andliabilities which should accompany them, thereby producing uncer-tain results. It is theoretically possible to evade some of theseproblems when a dispute arises, since rights of action can betransferred without the aid of § 1 by virtue of an assignment of the

3Per Mustill L.J. in Enichem Anic S.p.A. v. Ampelos Shipping Co. Ltd. (The Delfini),[1990] 1 Lloyd's Rep. 252, 274, building on his earlier tentative formulation in Karlshamns OljeFabriker v. Eastport Navigation Corporation (The Elafi), [1981] 2 Lloyd's Rep. 679, 687.

4per Mustill L.J. in The Delfini, supra note 3.

145Januar 1994


benefit of the contract contained in or evidenced by the bill of lading. 5

However, such assignments are rare, and involve an impracticableshift of responsibility onto the parties concerned. I shall thereforeignore this possibility for present purposes.

Problems arise in four main cases. The first is well known. If theoriginal shipper transfers the bill in such a way as not to attract theoperation of § 1, the new holder has no right of action under the billof lading contract, whilst the original shipper can still sue: nothing hastransferred the original contract away from him. Not only can thetransferee not sue, but even if the original shipper were to sue onbehalf of the transferee, he might be confronted by difficulties overdamages if he had parted with property. By analogy, in The Albaz-ero,6 charterers were effectively unable to recover on the charter-party where both property and risk had passed. On one view this wasbecause someone else could sue by virtue of the Bills of Lading Act;7

that would not apply here. But on another (wider) view, they couldnot sue because they had not suffered any loss. If the latter view wereto be adopted, the same reasoning may apply here (at least unless noone else at all can sue8) especially since no distinction was made inThe Albazero9 as to the position which would obtain if the contractwas one contained in or evidenced by a bill of lading.

The second case has received less attention. Problems can ariseconcerning the transferee who has the bill and the property, but, asabove, obtained the property independently of the bill in such a waythat indorsement of the bill did not play an "essential causal part"' 0

in the transfer of property. Arguably, once that transferee does getthe property, he can then transfer it on by means of the bill of lading,and if he does so in a way attracting the operation of § 1, the contractnow passes to the second transferee, even though it had not residedin the first transferee. It would seem reasonable to assume that aparty who is in the unsatisfactory position of having property but nocontract rights can still transfer property by means of the bill,especially if there is an appropriate delivery and perhaps an indorse-ment (though of course the bill may cease to be an effective document

5See Kaukomarkkinat ON v. Elbe Transport-Union G.m.b.H. (The Kelo), (1985] 2 Lloyd'sRep. 85, and Benjamin's Sale of Goods § 18-038 (4th ed. 1992) (hereinafter "Benjamin").

6[1977] A.C. 774.7 See Hobhouse J. in The Sanix Ace, [1987] 1 Lloyd's Rep. 465, at 469-470.'See The Aibazero, supra note 6, at 847, referring to the survival of a limited role for the old

case of Dunlop v. Lambert, (1839) 6 Cl. & F. 600.9 Supra note 6.

1oPer Mustill L.J. in The Delfini, supra note 3.

Vol. 25, No. I


of title when the goods are finally delivered). Such actions wouldbring the wording of § 1 back into play, transferring the contractrights to the second buyer" despite the absence of such rights in hisseller.

It might be objected that the word "transfer" in § 1 only applieswhere the holder has something to transfer. However, the sectiondoes not specify from whom the rights are transferred, and the factthat goods have been transferred once independently of the bill canhardly be said to deprive it of the status of document of title: for astart, the shipowner will still be liable to the bill of lading holder if hedelivers to someone else.' 2 Also, a similar revival of the contract, intothe hands of the holder of the bill, appears to take place upon theindorsement of the bill by a charterer.' 3

The third case springs from the previous one and concerns theposition of the second transferee. If he then transfers property in such-a way as not to attract the provisions of § 1, the contract arguablyremains with him, though someone else is now on risk who does nothave the contract. This may occur, for instance, if property passesunder the terms of a sale contract rather than by virtue of anindorsement. 14Such a scenario is different from the first, that of theoriginal shipper, who had the original contract of carriage of whichthe bill of lading was merely evidence. The second transferee is in thesurprising situation of having had a contract transferred to him whichnow does not leave him.

Such an analysis is based on what would appear to be a reasonableassumption that, if the contract rights are not transferred, they remainwith the person who previously held them. The most plausibleanalysis of such a situation is not that the bill of lading contract isextinguished, but that it remains with the transferor of the bill, whohas rights of action under it. If this were not the case, there would belosses in respect of which no one could sue, since even the ultimatereceiver would not be able to sue despite being on risk: The Delfini.15It would seem strange if the carrier is to be absolved fortuitously fromall liabilities under the contract, whilst being protected himself, forthe carrier is always able to sue the shipper under the original carriagecontract.1 6 But, given the proposed analysis, there are difficulties

"With the probable result that the original shipper can no longer sue.12Berjamin, supra note 5, at § 18-017.13 Scrutton on Charterparties art. 33 (19th ed. 1984).14 As it did to the first plaintiffs in The Delfini, supra.15[1990] 1 Lloyd's Rep. 252.16Benjanin, supra note 5, at § 18-040.

147January 1994


with the extent of damages recoverable by the person with whom thecontract resides, with the likelihood of cases where carriers can avoidliability because there is in effect no claim except for nominaldamages, as in The Albazero.'7

Fourthly, if there is a way in which the second transferee cantransfer the property without reference to the bill of lading other thanby delivery of the goods at the port of destination, further transfersdown a chain can raise similar problems, with the bill of ladingcontract becoming further separated from its holder.

-Such examples show how unsatisfactory the 1855 formula could be.Where cargo damage occurs, the bill of lading holder who suffers lossmight not be able to sue, but instead be forced to rely on attempts toensure that some previous holder of the bill (or, in some cases, theoriginal shipper) brings an action for him. This may involve almostimpossible problems, both legal and practical, in locating the personwho can sue. Moreover, if the present holder manages to sue in tort,which would on current authority in Commonwealth countries in-volve showing that he had property at the time of the damage,' 8 thenalthough he will have taken the bill with sight of its terms, the carrierwill be unlikely to be able to rely upon them, despite the fact that suchterms were agreed by the shipper.' 9 Also, in certain (albeit rare)instances where the carrier wishes to sue on the contract, for examplewhere the shipper has disappeared or gone into liquidation, he mighthave to carry out the same arduous investigative work in order to findout whom he could sue. Here the problems are likely to be evengreater, since the consecutive holders of the bill have no incentive toassist.

In addition, in some cases the presenter of the bill at the dischargeport will be unable to rely on the contract which it contains. He willinstead have to hope to establish an implied contract arising out of hispresentation of the bill. 20 Such a contract can be hard to establish,especially given the strict judicial approach taken in recent years. 2'The Law Commissions recognised the limited nature of the remedy intheir Report. 22

17[1977] A.C. 774; supra, text at note 6.'8 Leigh and Sillavan Ltd. v. Aliakmon Shipping Co. Ltd. (The Aliakmon), [1986] A.C. 785.191d. at 817-818.2°Brandt v. Liverpool, Brazil & River Plate Steam Navigation Co. Ltd., [1924] 1 K.B. 575,

and Benjamin, supra note 5, at §§ 18-032 et seq.2 1E.g., The Aramis, [1989] 1 Lloyd's Rep. 213.22The Report, supra note 2, at paras. 2.11-2.12.

Vol. 25, No. I


Finally, a person who was once holder of the bill might, at least intheory, be subject to suit for losses in respect of a period of time afterhe had ceased to be holder.23 This seems absurd, contradicting theexpectations of most sellers.

The position in the United Kingdom under the 1992 Act

The Carriage of Goods by Sea Act 1992 links the carriage contractalmost inseparably to the "lawful holder" of the bill. This reducesuncertainty and decreases the number of instances of conceptual andtheoretical difficulty. The position is therefore greatly improved.

Section 2(1)(a) gives the rights under the contract of carriage to the"lawful holder,"24 which, broadly, is any person who becomesholder of the bill of lading in good faith.25 Thus, when a person handsover the bill of lading, even if this occurs much later than the transferof the property (and lacks any causal connection with it), the rights ofsuit under the contract of carriage are transferred to and vested in therecipient and the rights of the previous holder are thereby extin-guished. 26 Furthermore, the liabilities under the contract of carriageonly attach in the circumstances set out in § 3(1) which, crudelysummarised, only involve the shipper and any person who takes ordemands delivery or makes a claim against the carrier.

This produces clarity as to the effect of dealings with the bill. Fora start, a previous holder will not normally be attacked for laterlosses. There is still the possibility of a holder having to sue for theloss of another, whether the person on risk or holder of property.Indeed, he is entitled to do so under § 2(4). However, buyers couldprovide that they will not assume the risk in the goods without thebill, or at least without a letter of indemnity, in which case the sellerwill be encouraged to sue since he will effectively be suing for his ownloss.

The carrier can clearly identify those whom he has to sue on thecarriage contract. In addition, the holder will usually only be liable incircumstances where he must perceive the possibility of being soliable since the examples of difficulties arising under the old law areharder to concoct under the new. Similar problems may still arise

23There are however issues as to whether a party to the bill of lading contract can be liablefor another person's breach; for it will be difficult to regard the later holder as an agent of theearlier party to the contract.

24This is subject only to a few minor exceptions, as set out in § 2.25Section 5(2).26Section 2(5).

149January 1994


where, for example, someone acquires the bill in bad faith. Then theprior holder will still be liable, and if the mala fide holder subse-quently transfers the bill to another who acquires in good faith, thecarriage contract will jump to the new holder. Also, as in theexamples concerning the 1855 formula, the prior holder may not beable to prove when or if this happened. But this is hardly cause forsurprise. Any holder must realise that if he loses or is tricked out ofthe bill, such consequences are quite possible.

The old problems have not entirely disappeared, however, andparties may be surprised by a contractual jump which might occa-sionally occur where the bill passes through the hands of a pledgee,most notably, a bank. For such a holder does not come within thedefinition of "lawful holder" unless he is a named consignee, or hecomes to possess the bill as a result of "the completion, by deliveryof the bill, of any indorsement of the bill, or, in the case of a bearerbill, of any other transfer of the bill. "27 Pledgees are rarely consigneesand often not indorsees. Whilst bearer bills are always likely to makethe pledgee a lawful holder, and bills indorsed in blank probablysatisfy the definition (the indorsement acting to authorise all subse-quent transfers), deliveries to pledgees of ordinary indorsable billswhich do not name the pledgee as consignee or indorsee are unlikelyto come within the phrase "completion of any indorsement." Where,for instance, the actual indorsee is the next buyer in the chain ratherthan the pledgee, it would be hard to argue that any indorsement hadbeen completed when the bill was handed over to the pledgee. For astart, if it were held that an indorsement was completed on such atransfer, and the pledgee did become lawful holder, then the actualindorsee could never become the lawful holder since, presumably, anindorsement cannot be completed twice.

Thus, where the pledgee is not consignee or indorsee and (proba-bly) when the bill is not indorsed in blank, he will be most unlikely toacquire the contractual rights under § 2(1) and the carriage contractwill remain with the last lawful holder of the bill (contrary to the aimsstated in the Report2 8 ). Once the bill comes back into the hands of anindorsee, thereby presumably effecting the completion "by deliveryof the bill" of an indorsement, the contract will jump from theprevious holder to the next. Such a situation will often arise where

27 Section 5(2).

28The Report, supra note 2, at para. 2.31. The pledgee will also not be liable on the contractin the situations in which The Report seems to envisage he would invoke it, since § 2(1) will nothave operated in his favour, thereby precluding the operation of § 3(1).

Vol. 2S, No. I


payment is to be made by letter of credit through a bank or banks, thecontract jumping from seller to buyer without touching the banks,even though they "hold" the bill.

This position may be intended, since pledgees (especially banks)frequently wish to avoid being involved in the mechanics of ship-ments. Further, even if there is cause to sue in such a situation, thenew law (designed to avoid the problem of The Albazero29) enables aprevious holder to sue "to the same extent" as the party suffering thedamage, 30 permitting him to recover substantial damages even thoughhe has suffered no personal loss. The only real problems for pledgeeswill lie in persuading the previous holder to sue, or, in the event of aninsolvency, having to rely on an implied contract: difficulties some-times arise in establishing such a contract. 31

Thus the possible lacuna in the new law would seem to be mild, andthe overall effects of the new Act seem likely to prove satisfactory.The policy of the draftsman and the arguments in the Report in favourof specifically extinguishing the right of the original shipper and ofany intermediate transferee 32 are much reinforced by the examples ofwhat could happen, at any rate in theory, under the previous Act. Ifthe holder is to have the action, it is important that the legislationmakes clear that others do not.33

CONCLUSION

The Carriage of Goods by Sea Act 1992 seems likely to increasecertainty for carriers and bill of lading holders alike by tying rights ofsuit in the United Kingdom under the contract of carriage firmly tothe document which is intended to pass those rights. Some problemsstill remain, but the overall effect seems likely to be satisfactory.

Any law reform agency contemplating reform on similar lines mayhowever wish to consider a minor improvement to obviate a confu-sion which may have been created by the wording of the new Actconcerning the nature of the contract which is transferred. The Actuses the words "contract of carriage" throughout; most importantly,it does so in §§ 2(1) and 3(1), which transfer the rights and impose the

29[1977] A.C. 774."Section 2(4).3 1Supra note 21.32The Report, supra note 2, at paras. 2.32-2.41.33The examples also cast modest doubt on Dr. E.M. Clive's Note of Partial Dissent to The

Report, supra note 2, at 41-44, in which he advocated leaving the original shipper with certainrights against the carrier.

January 1994


liabilities. These words are defined in this context as "the contractcontained in or evidenced by" the bill of lading. 34 This seems to implythat it is the original carriage contract which is transferred (with all itsterms, whether or not these are contained in the bill) rather than, asunder the 1855 regime, the contract appearing on the face and reverseof the bill of lading. 35 If such an interpretation is upheld, it couldcause obvious problems for buyers caught by terms not recorded onthe bill, of which they may have no knowledge.

34Section 501).35Because § 1 of the Bills of Lading Act 1855 referred only to the contract contained in the

bill of lading. Cf. Leduc v. Ward, (1888) 20 Q.B.D. 475.

Vol. 25, No. 1


Book Reviews

VOYAGE CHARTERS. By Julian Cooke, Timothy Young, AndrewTaylor, John D. Kimball, David Martowski, and LeRoy Lambert.London: Lloyd's of London Press, 1993. Pp. xcvii/931. UKP125.

Admiralty, on the one hand, is a field where great and dramaticchanges in technology have taken place, but on the other hand, in thearea of contracts and reference materials, nothing much has changedfor decades. We still prefer to fix ships on the basis of those charterparty forms we were familiar with when we got into the business, andwe still read and rely on those reference books we have grown upwith. Strangely enough, this is not because of the absence of newpublications, but because of the lack of more authoritative anddefinitive works. Therefore, Voyage Charters (following Lloyd'searlier publication of Time Charters') is a most welcome, longoverdue, and authoritative addition to the reference library, filling anexisting void.

The book was written by six highly regarded authorities in themaritime field, 2 one of whom also co-authored Time Charters.

The Rt. Hon. Lord Justice Staughton, in the foreword to this work,stated it all when he suggested that this book not only will fillnumerous functions for the ship master, but also will be a valuable aidto those in the owners' and charterers' offices trying to solveproblems or resolve disputes. (P. vii.)

In some ways, the title Voyage Charters is an understatement, asthe work covers more than just select charter parties. In Sections Iand II, the authors address both the U.S. and English court cases andarbitration decisions regarding the GENCON and ASBATANKVOYcharters. The user can obtain ready guidance to contractual oroperational difficulties arising under these contract forms. The workalso contains discussion on some currently unresolved legal and

'M. Wilford, T. Coghlin & J. Kimball, Time Charters (3d ed. 1989).2Julian Cooke is a barrister of Lincoln's Inn; Timothy Young is a barrister of Gray's Inn;

Andrew Taylor is a partner with Richards Butler; John D. Kimball is a partner with Healy &Baillie; David W. Martowski is a partner of Thos. R. Miller & Son; and LeRoy Lambert is apartner with Healy & Baillie.

153


practical problems. Section III covers The Hague and Hague-VisbyRules. In Section IV, the authors reprint statutes and rules, the mostfrequently used voyage charter party forms, and a list of charter partylaytime definitions.

In my opinion, and for those interested in international views, thestrength of the work lies in the fact that, like its forerunner TimeCharters, it provides line-by-line or clause commentaries as well ascomparative law, i.e., English and U.S. decisions.

The reader will notice that the references to the U.S. interpreta-tions generally cite New York arbitration awards, while the Englishreferences are to court decisions. One of the explanations for thisdifference is that most U.S. arbitration awards do not "progress" intothe judicial system for review. Arbitration awards are final and onlysubject to court review on very limited issues. The courts do not dealwith the substantive issues of the arbitration, but rather with mattersof procedure, including arbitrator conduct. Because the New Yorkarbitration awards are published upon their issuance and only rela-tively few cases find their way into the court system for confirmationor vacatur, the focus is much more on the arbitration awards.Although arbitrators in the U.S. are not bound by precedent, be it acourt or arbitration decision on point, a review of approximately thelast 1500 arbitration awards will show that in many instances panelsdiscuss or distinguish prior court and/or arbitration decisions. Ifarbitrators were bound by legal precedent, we could never seechanges unless the courts created a sufficient body of law at thehighest level, and overruled their earlier decisions.

For those focusing on the U.S. law aspect of the subject, this workprovides a further benefit through its citations to the awards pub-lished by the Society of Maritime Arbitrators, Inc. (SMA). The bookreflects the state of the law and arbitration decisions as of 1 January1993. At that time, the SMA had published 2935 arbitration awards,of which 513, involving the GENCON and ASBATANKVOY char-ters, are referred to in the book. The citations not only includecorresponding or related court proceedings, but also state the namesof the participating arbitrators. Although there are divergent views onthe benefits of identifying the names of the arbitrators with theirrespective awards, from the standpoint of providing a broad database, this work, like Time Charters, goes a long way. Havingpersonally participated in some of the New York arbitration awardscited, I find that the authors quite accurately and succinctly summa-rized and applied the cases. This type of referencing facilitates the

Vol. 25, No. I

arbitrators' research and preparation, but it also highlights, amongother things, the records and views of their colleagues.

I, for one, have no difficulty in reviewing and relying on decisionsreached in a different jurisdiction. Reading and weighing decisions ascited in this work, irrespective of whether they were reached inLondon or New York, makes for law that is alive and responsive. Thewording of the contract clauses per se might not change, but theinterpretations and applications should reflect today's conditions andpermit the arbitrators to place an issue into proper perspective andnot have to rely on a case that might have been good law at a differenttime and under completely different commercial circumstances. Voy-age Charters provides the practitioner a realistic and well-presentedshowcase of the present state of charter party law.

Because of its detailed reference and cross-reference system, theinformative appendices, and expansive coverage of terms, clauses,and interpretations, this book should be of great interest to scholarsand researchers as it will make their tasks easier.

If one were to find fault with the book, it would be with respect toits overall length. On occasion, the authors get bogged down in detailsby trying to cover too much. The book would benefit if some of thepassages could be tightened and the basic definition of terms could beomitted. There are a number of old standbys on the bookshelves; theyeliminate the need for this book to be an all-encompassing work. Asstated at the outset, the value of this work lies in the detailedtreatment of specific charter party forms, in the parallel, comparativelaw analysis, and in the combined wealth of experience of the authorsinvolved. Just as an aside, a point I should like to raise-and this iswithout reflection on the authors or the work itself-is that it is ashame that books cost as much as they do.

For those engaged in the field of admiralty, be it as lawyers,arbitrators, principals, or at sea, this book will not only be a greataddition to the library, but also an invaluable tool for effectivelydealing with contract and operational problems on an every day basis.

Manfred W. Arnold*

*Past President, Society of Maritime Arbitrators, Inc.

Book Reviews 155January 1 ON


THE LIABILITY OF THE HYDROGRAPHER. By N. R. Guy.Special Publication No. 10. Institute of Marine Law. Cape Town:University of Cape Town, 1989. ISBN 0 7992 11893. Pp. 56. No pricegiven.

This slim volume provides, on the one hand, an education forlawyers in the processes involved in the production and maintenanceof nautical charts and, on the other, an education for hydrographerson the terminology and essential facets of delict. Chapter 1 discussesthe evolution and present role of the State Hydrographer, including ahistorical lead-in, and then a description of the processes and peopleinvolved in producing nautical charts. The author completes thechapter with some comments on potential problem areas from a legalperspective.

Chapter 2 discusses delict and its five essential elements of con-duct, wrongfulness, causation, fault (negligence) and accountability,and damages and injury. To the non-lawyer, these terms take somegetting used to, particularly the legal process of applying tests.

Chapter 3 examines three court cases and one incident involvingpossible state hydrographic culpability. Some of these cases havebeen examined in earlier references but this publication particularlyexamines them in the context of delict. These cases are the groundingof the Esso Essen in 1968 in South African waters, the grounding ofthe Potomac in 1972 while entering the port of Casablanca, the Tsesisgrounding in 1977 in Swedish waters, and the sinking of the Urquiolain 1974 in the Spanish port of Coruna.

Finally, in Chapter 4, Conclusions and Recommendations, theauthor brings together his findings with reference to some of thebetter known authorities and cases. In this part of the book, he onceagain refers his conclusions to the elements of delict, and notes thatthe State Hydrographer is not immune to litigation, irrespective of thefact that he is providing a service to the community at great expenseto the State. Immediately before his final conclusions, the authormakes reference to changing technology and the electronic era inwhich charts may no longer be provided on a paper medium but in theform of a video display.

In the narrow field of hydrography and the even narrower field ofthe law dealing with hydrography, one can count the number of booksand articles dealing with the subject on the fingers of one hand. It is,

Book Reviews 157

therefore, a pleasure to have another reference to add to the library.The actual publication and printing of this book has clearly been on alimited budget as the type-style is rather poor (although it is perfectlyreadable). The illustrations leave much to be desired. They areprimarily copied sections of charts but, unfortunately, as suchprovide no information on the scale or whether the units used are inmetres or fathoms or which Hydrographic Office produced theoriginal chart of which a portion is shown. While the reader may pullout the actual chart, it would have been convenient to have been ableto study the features directly from the illustrations.

It is rather surprising that no quotation has been made in thepublication of what must surely be the most relevant and well-knownstatement concerning the legal liability of hydrographers. The state-ment, made by Lord Justice Asquith in 1951, is worth repeating:

The case has been instanced ... of a marine hydrographer whocarelessly omits to indicate on his map [i.e., a chart] the existence of areef. The Captain of the "Queen Mary," in reliance on the map andhaving no opportunity of checking it by reference to any other map,steers her on the unsuspected rocks, and she becomes a total loss. Isthe unfortunate cartographer to be liable to her owners in negligence forsome millions of pounds damages? If so, people will, in future, thinktwice before making maps. Cartography would become an ultra-hazardous occupation.'

In fairness to the author, his main attention has been given to SouthAfrican law, although he does also give reference to some of thebetter-known cases in English and Commonwealth law, such asWarwick Shipping Ltd. v. The Queen.2

The above points of criticism must be considered minor. This is auseful reference and should prove helpful both to lawyers andhydrographers alike in understanding something more about eachother's world.

Adam J. Kerr*

*Director, International Hydrographic Bureau, Monaco.

'Candler v. Crane, Cristmas & Co., [1951] 2 K.B. 164, 194 (C.A.) (Asquith, L.J.). Thisstatement was paraphrased by Peter M. Troop, Q.C., in a well-known reference on the subject.See Troop, The Legal Liability of the Chartmaker, 62 Int'l Hydrographic Rev. 115, 120 (1985).

21[1982] 2 F.C. 147 (Can. Fed. Ct., Trial Div. 1980).

January 1994

journal of Maritime Law and Commerce, Vol. 25, No. 2, April, 1994

A Corporate "Citizen of the United States" forMaritime Law Purposes

JOHN W. McCONNELL, JR.*

I.INTRODUCTION

In December 1990, the Coast Guard issued a final rule amending itsregulations to require that each stockholder contributing to the stockor equity interest qualifications of a vessel-owning corporation be aUnited States citizen eligible to document vessels in its own right withthe trade endorsement sought.'

In July 1991, the Maritime Administration ("MarAd") promulgated aninterim final rule implementing § 2 and § 9 of the Shipping Act, 1916, asamended ("1916 Act") ("§ 2" or "section 2" and "§ 9" or "section 9"),2

and the Bowaters Amendment, 3 which applied the citizenship require-ments of § 2 to any controlling interest stockholder, any person whosestock is being relied upon to establish the requisite citizenship owner-ship, and any parent corporation, partnership or other entity at all tiersof ownership.4 The final rule was promulgated in June 1992.5

*Of Counsel, Haight, Gardner, Poor & Havens (Washington Office). University of Alabama,

B.A. and M.A.; Yale Law School, LL.B. The author wishes to acknowledge the very ableassistance of Franceska Schroeder, an associate in the Washington Office of Haight, Gardner, Poor& Havens, in researching some of the issues discussed, in verifying citations, in formatting, andgenerally in reviewing this article. The views and opinions expressed in this article are those of theauthor and do not necessarily reflect any of his firm or of any client of the firm.

155 Fed. Reg. 51,244, 51,251 (CGD 88-031) (1990), to be codified at 46 C.F.R. § 67.03-2(b).This regulation was proposed in a Supplemental Notice of proposed rulemaking published in 54Fed. Reg. 41,992, 41,998 (1989).

2Pub. L. No. 260, ch. 451, § 2 and 9, 39 Stat. 728, 729, 730 (1916), 46 U.S.C. app. 99 802, 808 (1988).3This Amendment was added as section 27A of the Shipping Act, 1920, as amended, in 1958

by Pub. L. No. 85-902, 72 Stat. 1736, and codified at 46 U.S.C. app. § 883-1 (1988).456 Fed. Reg. 30,654, 665 (1991) (Docket No. R-135), to be codified at 46 C.F.R. § 221.3(c).

These rules resulted from § 104(a), Pub. L. 100-710, Title I, 102 Stat. 4735, 4750, effective January1, 1989, and § 304(a), Title Ill, Pub. L. 101-225, 103 Stat. 1908, 1924, which amended § 9, and from§ 102(c), Pub. L. 100-710, 102 Stat. 4739, which amended the Ship Mortgage Act, 1920. MarAdinitially proposed an "interim final rile" in 54 Fed. Reg. 5382 (amended in 54 Fed. Reg. 8185)(1989). MarAd then issued a notice of proposed rulemaking in 55 Fed. Reg. 140 (1990).

557 Fed. Reg. 23,470, 23,479 (1992), to be codified at 46 C.F.R. § 221.3(c).

159


These regulations were challenged but upheld when, on July 16,1992, the Court of Appeals for the Third Circuit rendered a decisionin Conoco, Inc. v. Skinner.6

In 1991, Conoco, Inc. ("Conoco") and E.I. Du Pont de Nemours("Du Pont") filed a complaint in the U.S. District Court for theDistrict of Delaware against Samuel K. Skinner (Secretary of Trans-portation), Warren G. Leback (Maritime Administrator), Nicholas F.Brady, William A. Kime (Commandant of the Coast Guard), andCarol B. Hallett (Commissioner of Customs), challenging certainregulations of the Coast Guard, the Customs Service and MarAd. Thedefendants in this action moved to dismiss for lack of jurisdictionbased upon provisions of the Hobbs Act 7 which place exclusivejurisdiction to determine the validity of rules and regulations issuedby the Secretary of Transportation pursuant to, among others, §§ 2,9 and 37 of the Shipping Act, 1916, in the courts of appeal.8 Thedistrict court granted the motion for dismissal9 and the plaintiffsappealed to the Court of Appeals for the Third Circuit.10

In the meantime, Conoco and Du Pont had filed a petition chal-lenging the same regulations in the Third Circuit under the Hobbs Actagainst Skinner, Leback and the United States.

The Circuit court consolidated the appeal with the original suit filedin that court," and the Conoco decision was rendered in thatconsolidated proceeding.' 2

The Conoco decision is most important because of: (1) its interpre-tation of the citizenship requirements of § 2 as applied to § 9 and to§ 27 of the Merchant Marine Act, 1920, as amended ("1920 Act")("section 27" or "§ 27"),13 (2) its approval of the MarAd and CoastGuard regulations implementing those statutory sections, and (3) itsinterpretation of § 27A of the 1920 Act ("Bowaters Amendment" or"Amendment" or "section 27A" or "§ 27A").14 This decision is themost comprehensive court decision on the interpretation and appli-cation of these statutory provisions since the decision of the Supreme

6970 F.2d 1206, 1992 AMC 2816 (3d Cir. 1992) [hereinafter Conoco].728 U.S.C..§§ 2341-58 (1988).&28 U.S.C. § 2342(3)(A) (1988).9Conoco v. Skinner, 781 F. Supp. 298, 1992 AMC 2408 (D. Del. 1991).

I'No. 91-3920."No. 91-3589.12The plaintiffs filed a motion for rehearing and suggestion for rehearing en banc, which was

denied. Conoco at 1230. The plaintiffs did not file a petition for certiorari with the SupremeCourt.

OPub. L. No. 261, 41 Stat. 988, 999. 46 U.S.C. app. § 883 (1988).14 Conoco, 970 F.2d at 1212 n.5, 1992 AMC at 2823 n.5.

Vol. 25, No. 2

Citizen of the United States

Court in Central Vermont Transportation Co. v. Durning.1 5 Thepurpose of this article is to show that the decision is fatally flawed,particularly in its interpretation of Central Vermont, and that CentralVermont, as correctly interpreted, should be the controlling case ininterpreting § 2 and the agency regulations.

In order to properly analyze the court's decision and its importanceto the interpretation of the applicable statutes and regulations, thisarticle is divided into two parts. First, the language, purpose andhistory of the applicable statutory provisions and implementingregulations will be examined. Second, the Conoco decision will beanalyzed with respect to its interpretation and application of thosestatutory sections and regulations to the facts of the case.

II.ANALYSIS OF STATUTES AND REGULATIONS

The statutory provisions to be examined are: § 2, the citizenshiprequirements for the 1916 Act and for the 1920 Act16; § 9, the transferprovisions of the 1916 Act; § 27, the citizenship requirements forowners of vessels transporting merchandise by water in the coastwisetrade; § 316 of Title 46 U.S.C. app. ("section 316" or "§ 316"), therequirements for vessels towing other vessels in the coastwise trade;§ 12102 and § 12106 of Chapter 121 (Documentation of Vessels) ofTitle 46 U.S.C. ("section 12102" or "§ 12102" and "section 12106"or "§ 12106"), which relate respectively to vessels eligible fordocumentation and for coastwise endorsements; and § 27A, theBowaters Amendment.

2.1 Requirements for a Corporation To Be Deemed a Citizen of the

United States

2.1.1 Section 2, Shipping Act, 1916, as amended

Section 2 of the 1916 Act, as originally enacted, provided in part asfollows:

'5294 U.S. 33, 1935 AMC 9 (1935) [hereinafter Central Vermont].16Section 37 of the 1920 Act provides that for purposes of the 1920 Act the term "citizen of

the United States" shall have the meaning assigned to it by "sections 1 and 2 of the 'ShippingAct, 1916,' as amended". 46 U.S.C. app. § 888 (1988). Also section 905(c) of the MerchantMarine Act, 1936, provides that the words "citizen of the United States" include a corporation"only if it is a citizen of the United States within the meaning of section 802 [§ 2 of the 1916Act] of this Appendix." 46 U.S.C. app. § 1244(c) (1988).

A1 19N


Sec. 2. That within the meaning of this Act no corporation, partnership,or association shall be deemed a citizen of the United States unless thecontrolling interest therein is owned by citizens of the United States,and, in the case of a corporation, unless its president and managingdirectors are citizens of the United States and the corporation itself isorganized under the laws of the United States or of a State, Territory,District, or possession thereof.17

In 1918, § 2 was amended by adding the following paragraph:

The controlling interest in a corporation shall not be deemed to beowned by citizens of the United States (a) if the title to the majority ofthe stock thereof is not vested in such citizens free from any trust orfiduciary obligation in favor of any person not a citizen of the UnitedStates; or (b) if the majority of the voting power in such corporation isnot vested in citizens of the United States; or (c) if through any contractor understanding it is so arranged that the majority of the voting powermay be exercised, directly or indirectly, in behalf of any person who isnot a citizen of the United States; or (d) if by any other meanswhatsoever control of the corporation is conferred upon or permitted tobe exercised by any person who is not a citizen of the United States. 18

In 1920, § 2 was further amended by § 38 of the 1920 Act19 bymaking the first unnumbered paragraph of that section into subsection(a) and adding at the end thereof the following: "but in the case of acorporation, association or partnership operating a vessel in thecoastwise trade the amount of interest required to be owned bycitizens of the United States shall be 75 per centum." The amend-ment also made the second unnumbered paragraph of that section(defining "controlling interest") into subsection (b) and added thefollowing as subsection (c):

(c) Seventy-five per centum of the interest in a corporation shall not bedeemed to be owned by citizens of the United States (a) if the title to 75per centum of its stock is not vested in such citizens free from any trustor fiduciary obligation in favor of any person not a citizen of the UnitedStates; or (b) if 75 per centum of the voting power in such corporationis not vested in citizens of the United States; or (c) if, through anycontract or understanding, it is so arranged that more than 25 percentum of the voting power in such corporation may be exercised,directly or indirectly, in behalf of any person who is not a citizen of theUnited States; or (d) if by any other means whatsoever control of anyinterest in the corporation in excess of 25 per centum is conferred upon

17 Supra note 2.l8Public L. No. 198, ch. 152, § 2, 40 Stat. 900.19Supra note 13, at 1008.

Vol. 25, No. 2


or permitted to be exercised by any person who is not a citizen of theUnited States.

Subsection (c), in defining 75 per centum of the interest, merelysubstituted into the definition of "controlling interest" in subsection(b), the words "75 per centum" for "majority" and "control of anyinterest in the corporation in excess of 25 per centum" for "controlof the corporation."

Section 2 was amended for the last time in 1959. In § 2(a), thewords "unless its president and managing directors are citizens of theUnited States" were replaced by the words "unless its president orother chief executive officer and the chairman of its board of directorsare citizens of the United States and unless no more of its directorsthan a minority of the number necessary to constitute a quorum arenoncitizens. "20

MarAd has issued regulations specifying the procedures by whicha corporation may prove its U.S. citizenship.21 These regulationsprovide that, to prove its U.S. citizenship, a corporation must submitan affidavit to MarAd stating its place of incorporation and thecitizenship of its officers and directors and of its shareholders. Wherethere are less than 30 shareholders of a corporation, each shareholderwith his citizenship (and how it was acquired) may be named in theaffidavit along with the number of shares held by each shareholderand the total amounts of stock and of voting power held by U.S.citizens meeting the requirements of § 2.

The task becomes more onerous where there is a larger number ofshareholders. Such a corporation can still prove its U.S. citizenshipby listing in the affidavit each of its shareholders and their respectivecitizenship. However, to forestall the difficulties inherent in therequirement that a corporation with a large number of shareholdersobtain evidence of his or her citizenship from each shareholder,MarAd adopted the so-called "fair inference" rule based upon thedecision in Collier Advertising Service, Inc. v. Hudson River DayLine.22 The fair inference rule allows corporations to count as citizensof the United States those shareholders with registered addresses inthe United States as shown on its books and records. Shareholdersholding more than 5% of the stock of the corporation must be listed

2Pub. L. No. 80-237, § 3, 73 Stat. 597 (1959).

2146 C.F.R. Part 355 (1993). These regulations pertain to citizenship requirements under theMerchant Marine Act, 1936, as amended, § 905(c) of which incorporates into the 1936 Act thedefinition of citizens of the United States as provided in § 2. See supra note 16.

2214 F. Supp. 335, 339, 1936 AMC 206, 212 (S.D.N.Y. 1936).

163Apdl 1994


separately. Under the fair inference rule, the "controlling interest" ofa corporation is deemed to be held by citizens of the United States if65% of its stock is held in the name of persons with registeredaddresses in thie United States. The same rule also holds that "75%interest" of the corporation is deemed to be held by citizens of theUnited States if 95% of its stock is held in the name of persons withregistered addresses in the United States. 23 This rule infers thatpersons with registered addresses not in the United States are notU.S. citizens and further that less than 15% of the stock, in the caseof controlling interest, and less than 20% of the stock, in the case ofthe 75% interest, held by persons with registered addresses in theUnited States is actually held by persons who are not U.S. citizens.

A corporation, partnership or association satisfying the citizenshiprequirements of § 2 is sometimes referred to as a "section 2 citizen."However, it should be cautioned that this shorthand reference coversentities with both a "controlling" and a "75%" interest held by U.S.citizens.

2.1.2 Section 9, Shipping Act, 1916, as Amended

The second and third unnumbered paragraphs of § 9 as adopted inthe 1916 Act provided in part as follows:

Every vessel purchased, chartered, or leased from the [United StatesShipping] board ... No such vessel, without the approval of the board,shall be transferred to a foreign registry or flag, or sold; nor, exceptunder regulations prescribed by the board, be chartered or leased.

When the United States is at war, or during any national emergency theexistence of which is declared by proclamation of the President, novessel registered or enrolled and licensed under the laws of the UnitedStates shall, without the approval of the board, be sold, leased, orchartered t any person not a citizen of the United States, or trans-ferred to a foreign registry or flag. 24

In 1918, the third unnumbered paragraph of § 9 was struck and anew section, § 37, was added, which provided, in part:

Sec. 37. That, when the United States is at war or during any nationalemergency, the existence of which is declared by proclamation of thePresident, it shall be unlawful, without first obtaining the approval ofthe board:

2346 C.F.R. § 355.3 (1992).24Supra note 2.

Vol. 25, No. 2

(a) To transfer to or place under any foreign registry or flag any vesselowned in whole or in part by any person a citizen of the United Statesor by a corporation organized under the laws of the United States, or ofany State, Territory, District, or possession thereof; or(b) To sell, mortgage, lease, charter, deliver, or in any manner transfer,or agree [to the same] to any person not a citizen of the United States(1) any such vessel or any interest therein, or (2) any vessel docu-mented under the laws of the United States, or any interest therein, or(3) any shipyard, dry dock, ship-building or ship-repairing plant orfacilities, or any interest therein; or

(e) To make any agreement or effect any understanding whereby thereis vested in or for the benefit of any person not a citizen of the UnitedStates, the controlling interest or a majority of the voting power in acorporation which is organized under the laws of the United States, orof any State, Territory, District, or possession thereof, and which ownsany vessel, ship-yard, dry dock, or ship-building or ship-repairing plantor facilities .... 25

The second unnumbered paragraph of § 9 was amended by the 1920Act, so that the prohibition against transfers to foreign flags, sales orcharters was made into a separate third unnumbered paragraph:

It shall be unlawful to sell, transfer or mortgage, or, except underregulations prescribed by the board, to charter, any vessel purchasedfrom the board or documented under the laws of the United States toany person not a citizen of the United States, or to put the same undera foreign registry or flag, without first obtaining the board's approval. 26

The 1916 and 1918 Acts were enacted during, and were greatlyaffected by, World War I. Originally, the principal purpose of § 9 wasto restrict the transfer of U.S. vessels during periods of war ornational emergency. As amended, § 9 was to apply during normalperiods and old § 9 became § 37 and continued to apply duringperiods of war or national emergency.

Originally, § 9 applied exclusively to vessels purchased or char-tered from the Board, and prohibited any transfers to foreign registryor flag and any sales and charters of such vessels without Boardapproval. However, as amended in 1920, during normal periods, § 9also applied to U.S. documented vessels (without regard to thecitizenship of owners except as required for documentation purposes)and to mortgages of such vessels and, for the first time, such transfersto U.S. citizens did not require Board approval.

25Supra note 18, § 4, at 901-2.26Supra note 13, § 18, at 994.

Citizen of the United States 165April 1994


Originally, during times of war or national emergency, § 9 prohib-ited any documented vessel from being sold or chartered to anyperson not a U.S. citizen or transferred to foreign registry. However,as amended in 1918 as § 37, the wartime restrictions were made muchmore stringent. Section 37 applied to all vessels owned by a citizen ofthe United States (in whole or in part) or by a U.S. corporation(without regard to the citizenship of its officers, directors or share-holders) and to all transfers of such vessels to noncitizens. 27 Most

importantly, § 37 also prohibited the "controlling interest" or "amajority of the voting power" of a U.S. corporation which owns anyvessel from vesting in or for the benefit of a noncitizen. At the sametime, § 2 was amended to add the definition of "controlling interest."The third and fourth unnumbered paragraphs of § 9 were struck in1938 and replaced by two new unnumbered paragraphs, the first ofwhich provided, in part, as follows:

[I]t shall be unlawful, without the approval of the United StatesMaritime Commission, to sell, mortgage, lease, charter, deliver, or inany manner transfer, [or agree to such] to any person not a citizen ofthe United States, or transfer or place under foreign registry or flag, anyvessel or any interest therein owned in whole or in part by a citizen ofthe United States and documented under the laws of the United States,or the last documentation of which was under the laws of the UnitedStates.28

It is important to note that § 9 as amended included for the firsttime the specification that its applicability was to vessels that werenot only documented in the U.S. 29 but also owned by citizens of theUnited States.30 Thus, for the first time, the definition of "citizens ofthe United States" in § 2 applied to the owner of the vessel beingtransferred and not just to the transferee. This meant that, except intimes of war or national emergency when § 37 applied, documentedvessels owned by a corporation with less than a controlling interestowned by U.S. citizens could be transferred to a noncitizen without

27These restrictions would apply equally to foreign-flag as well as U.S.-flag vessels owned byU.S. citizens or U.S. corporations.

28Pub.L. No. 705, ch. 600, § 42, 52 Stat. 953, 964 (1938).29Section 37 of the 1916 Act still applied to any vessel owned by a U.S. citizen regardless of

where documented."When the national emergency declared during the Korean action ended in 1978, thereby

terminating the application of § 37, MarAd attempted to apply this requirement in thedisjunctive by treating "and" as "or" in the phrase "owned by a citizen of the United Statesand documented", which interpretation was effectively blocked by the dropping of "and" from§ 9(c)(1) as amended in 1988. See infra note 32 and accompanying text.

Vol. 25, No. 2


the approval of MarAd. The phrase "or the last documentation ofwhich was under the laws of the United States" was added to preventthe withdrawal of the vessel's documentation followed by a transferof the vessel without the required approval.

In 1988, the third unnumbered paragraph of § 9 was designatedsubsection (c) and was split into two subparagraphs, 31 so thatsubsection (c)(1), the relevant portion of § 9, now provides, in part, asfollows:

(c) [A] person may not, without the approval of the Secretary ofTransportation-

(1) sell, mortgage, lease, charter, deliver, or in any manner transfer,or agree to sell, mortgage, lease, charter, deliver, or in any mannertransfer, to a person not a citizen of the United States, any interest inor control of a documented vessel . . . owned by a citizen of theUnited States or the last documentation of which was under the lawsof the United States;32

Responsibility for administration of § 9 has been delegated by theSecretary of Transportation to MarAd. Thus, MarAd's approval isrequired for certain transfers (i.e., sales, mortgages, leases, charters),or agreements for the same, or of any interest in or control of U.S.documented vessels (or vessels the last documentation of which wasunder the laws of the United States). Note, however, that all suchtransfers do not necessarily require such approval. Only transfers ofa "documented vessel owned by a citizen of the United States" to aperson "not a citizen of the United States" require approval. Thus,if the vessel being transferred is a documented vessel, the citizenshipof the owner of the vessel being transferred and of the transferee mustbe determined to ascertain whether approval of such transfer isrequired.

In the MarAd regulations implementing § 9, the definition of"citizen of the United States" is set out in § 221.3(c) and provides, inpart, as follows:

(c) Citizen of the United States means a Person . . . including anyPerson (stockholder, partner or other entity) who has a ControllingInterest in such Person, any Person whose stock or equity is beingrelied upon to establish the requisite U.S. citizen ownership, and anyparent corporation, partnership or other entity of such Person at alltiers of ownership, who, in both form and substance at each tier of

31Pub. L. No. 100-710, § 104(b)(3), 102 Stat. 4735, 4750 (1988).

3246 U.S.C. app. § 808 (1988). The words "or control of" were added by Pub. L. No.

100-710 in 1988.

167April 1I94


ownership, satisfies the following requirements-(2) A corporation organized under the laws of the United States or ofa State, the Controlling Interest of which is owned by and vested inCitizens of the United States and whose president or chief executiveofficer, chairman of the board of directors and all officers authorizedto act in the absence or disability of such persons are Citizens of theUnited States, and no more of its directors than a minority of thenumber necessary to constitute a quorum are Noncitizen; 33

The provisions of paragraph (2) of subsection (c), quoted above, arethe same as those in the citizenship definition of § 2(a) of the 1916 Actwith the exception of the addition of "and all officers authorized to actin the absence or disability of such persons." However, the definition inthe opening paragraph of subsection (c) applies, in the case of corpora-tions, not only to the corporation whose citizenship is being determinedfor § 9 purposes, but also to any stockholder who has a controllinginterest in such corporation, to any corporation whose stock or equity isbeing relied upon to establish the requisite U.S. citizen ownership and toany parent corporation, at all tiers of ownership.

Subsection (d)(1) of § 221.3 defines "Controlling Interest," in thecase of a corporation, in language almost verbatim to that of § 2(b).However, subsection (d)(5) of § 221.3 covers the situation addressedin subsections (a) and (c) of § 2, corporations owning vessels oper-ated in the coastwise trade, and provides that:

(5) In the case of a corporation, association or joint venture owning avessel which is operated in the coastwise trade, the amount of interestand voting power required to be owned by and vested in Citizens of theUnited States shall be not less than 75 per cent as required by 46 U.S.C.app. 802. [emphasis added].

Thus, § 221.3(c) requires that each stockholder (corporation, part-nership or other entity) having a controlling interest (as defined in§ 221.3(d)) in a corporation whose citizenship is to be determinedunder § 2 must also be a citizen of the United States as defined in thatsection. This citizenship requirement applies through each tier ofcorporate (or partnership or other entity) ownership up to thestockholders of the corporation (or equity owners) at the top of thetier. This results from § 2's requirement that the controlling interestin each entity of this tier be owned by citizens of the United States inorder for the corporation at the lowest tier to be deemed a citizen ofthe United States.

3346 C.F.R. § 221.3(c) (emphasis added).

Vol. 25, No. 2

2.1.3 Section 27, Merchant Marine Act, 1920

Section 27 provides, in relevant part, as follows:

Sec. 27. That no merchandise... shall be transported by water, or byland and water, on penalty of forfeiture of the merchandise .. ,between points in the United States .... embraced within the coast-wise laws, either directly or via a foreign port, or for any part of thetransportation, in any other vessel than a vessel built in and docu-mented under the laws of the United States and owned by persons whoare citizens of the United States ....

Thus, in order to transport merchandise in the coastwise trade, thevessel performing such transportation must satisfy three conditions:(1) it must have been built in the United States, (2) it must bedocumented under the laws of the United States, and (3) it must be"owned by persons who are citizens of the United States." 35

A vessel not built in the United States may be documented under thelaws of the United States. However, in order for a vessel documented inthe United States to qualify for a coastwise endorsement, 46 U.S.C.§ 12106(a)(1)(A) (1988) requires that it be built in the United States and"otherwise qualify under the laws of the United States to be employedin the coastwise trade," that is, under § 27 (among others).

2.1.4 Documentation laws

Chapter 121 of Title 46 U.S.C. (1988, Supplement 111990) containsthe requirements for documenting vessels under U.S. laws. Section12102 contains the requirements for owners of vessels to qualify todocument vessels under U.S. laws. 36 Subsection (a) of § 12102provides that a vessel of at least five net tons not registered under the

3446 U.S.C. app. § 883. The first cabotage law which prohibited the carriage of cargobetween coastwise points in foreign vessels was enacted by the Act of March 1, 1817, ch.XXXI, § 4, 3 Stat. 351 (later codified at § 4347, Revised Statutes, Second Edition, 1878), whichprovided "That no goods, wares, ormerchandise shall be imported, under penalty of forfeiturethereof, from one port of the United States to another port of the United States in a vesselbelonging wholly or in part to a subject of any foreign power.. . ." This statute was changedin 1898 by the Act of February 17, 1898, ch. 26, § 1, 30 Stat. 248, to read more like § 27 bysubstituting "in any other vessel than a vessel of the United States" for "in a vessel belongingwholly or in part to a subject of any foreign power."

3The term "citizen of the United States" when used in the 1920 Act shall have the meaningof § 2. Supra note 16.

36The persons or entities who, as owners of vessels, qualify to document vessels under§ 12102 are sometimes referred to as "documentation citizens." A documentation citizen maybe, and in the case of corporations, partnerships and associations usually is, different from a § 2citizen. See infra note 37.

169Citizen of the United StatesApril 1W


laws of a foreign country is eligible for documentation if the vessel isowned by-

(4) a corporation established under the laws of the United States or ofa State, whose president or other chief executive officer and chairmanof its board of directors are citizens of the United States and no moreof its directors are noncitizens than a minority of the number necessaryto constitute a quorum;

This is the same requirement as provided in § 2(a) except that § 12102does not require that the controlling interest of the corporation be ownedby citizens of the United States. Thus, a documented vessel owned bya corporation meeting the requirements of § 12102(a)(4), but not the"controlling interest" requirement of § 2, could be transferred to anon-citizen without the approval of MarAd, because it would not be atransfer of a documented vessel "owned by a citizen of the UnitedStates" as required in § 9. However, if a documented vessel owned bya citizen of the United States as defined in § 2 were to be transferred toa corporation meeting the documentation requirements of § 12102(a)(4),but not the controlling interest requirement of § 2, such a transfer wouldbe subject to approval by MarAd, because it would be a transfer to aperson not "a citizen of the United States" as provided in § 9.37

Section 12106(a) provides that:

a certificate of documentation may be endorsed with a coastwiseendorsement for a vessel that-

(1) is eligible for documentation;(2)(A) was built in the United States;38 or

37 Such a situation does not exist in the case of partnerships or associations, which likecorporations are subject to the definition in § 2. Section 12102(a)(2) provides that a vessel iseligible for documentation if it is owned by "an association (A) all of whose members arecitizens of the United States"; whereas § 2(a) requires that only a controlling interest in anassociation need be held by citizens of the United States for the association to be deemed a U.S.citizen. Also § 12102(a) provides that a vessel is eligible for documentation if it is owned by "(3)a partnership whose general partners are citizens of the United States and the controllinginterest in the partnership is owned by citizens of the United States;" whereas § 2 requires thatonly a controlling interest in the partnership need be held by U.S. citizens (without regard to thecitizenship of its general partners) for the partnership to be deemed a U.S. citizen. Thus, thecitizenship requirements for the owner for documentation purposes differ from those of § 2 forpartnerships, associations and corporations. However, in the former two, the documentationstatute has more stringent requirements than those in § 2; whereas for corporations thedocumentation requirements are less stringent than those in § 2.

38The same "place of build" requirement applies to vessels to be eligible for a Great Lakesendorsement (§ 12107) and a fishery endorsement (§ 12108). However, there is no suchrequirement for a registry endorsement (§ 12105) or a recreational endorsement (§ 12109). Fromthe beginning of the Nation, with the exception of certain special statutory provisions andspecial legislation, a vessel to be documented under the laws of the United States must have

Vol. 25, No. 2


(3) otherwise qualifies under the laws of the United States to beemployed in the coastwise trade.

2.1.5 Section 316, Title 46 U.S.C. app.

Section 316(a) of Title 46 provides in part as follows:

(a) It shall be unlawful for any vessel not wholly owned by a personwho is a citizen of the United States within the meaning of the lawsrespecting the documentation of vessels and not having in force acertificate of documentation issued under section 12106 or 12107 ofTitle 46 to tow any vessel other than a vessel in distress, from any portor place in the United States, its Territories or possessions, embracedwithin the coastwise laws of the United States, to any other port orplace within the same. .... 39

Subsection (b) of § 316 provides:

(b) The term "person" as used in subsection (a) of this section, shall beheld to include persons, firms, partnerships, associations, organiza-tions, and corporations, doing business or existing under or by theauthority of the laws of the United States, or of any State, Territory,district, or other subdivision thereof.40

Thus to perform such a tow, a vessel must be (1) wholly owned bya person who is a citizen of the United States within the meaning ofthe documentation laws, and (2) must have a certificate of documen-tation issued under § 12106 (coastwise endorsement) or § 12107(Great Lakes endorsement). As noted earlier, in order for a vessel tohave its document endorsed with a coastwise license, § 12106 re-quires that: (1) it is eligible for documentation (which it is under§ 12102 if it meets the ownership requirements of that section), (2) isbuilt in the United States, and (3) "otherwise qualifies under the lawsof the United States to be employed in the coastwise trade."

been built in the United States. This requirement was changed in 1912 to allow vessels not morethan five years old wherever built to be U.S. documented (provided that such vessels could notbe used in the coastwise trade). Pub L. No. 337, ch. 390, § 5, 37 Stat. 560, 562 (Panama CanalAct). The restriction on documentation of foreign built vessels over five years of age wasrepealed in 1914. Pub. L. No. 175, ch. 256, § 1, 38 Stat. 698.

3946 U.S.C. app. § 316(a) (1988) (emphasis added). The forerunner of this statute was § 4370,Revised Statutes. When that statute was amended in 1940, by Pub. L. No. 599, ch. 324, 54 Stat.304, instead of "certificate of documentation issued under section 12106 or 12107 of Title 46,"§ 4370 provided "certificate of registry, a certificate of enrollment, or a license, issued pursuantto this section" and instead of "other than a vessel in distress," provided "other than a vesselof foreign registry or a vessel in distress." The present wording was adopted by Pub. L. No.99-307, § 10, 100 Stat. 444, 447 (1986).

4046 U.S.C. app. § 316(b) (1988).

Apdl 1994


In the case of merchandise transported by water between points inthe United States embraced within the coastwise laws in a vessel, thevessel must be owned by a citizen of the United States as defined in§ 2. However, the towing of one vessel by another has been held notto be transporting merchandise in a vessel subject to § 27. 4 1

Nowhere are the terms "employed in the coastwise trade" or"coastwise trade" defined in or for the relevant statutes. They are notdefined in the general definitions applicable to subtitle II nor in thedefinitions applicable to chapter 121 of 46 U.S.C. (1988). "Coastwisetrade" is defined by the Coast Guard in 46 C.F.R. § 67.01-1 asincluding "the transportation of passengers or merchandise betweenpoints embraced within the coastwise laws," and does not limit suchtransportation to water or in a vessel (without citing any authority). 42

However, it is generally recognized that transporting merchandise orpassengers by water in a vessel between two U.S. points is coastwisetrade.

The Customs Service has issued regulations pertaining to vessels inforeign and domestic trades.4 3 Coastwise procedure is contained in§§ 4.80 through 4.93. Section 4.80 pertains to "vessels entitled toengage in coastwise trade" but it appears to apply only to transpor-tation covered by § 27 and 46 U.S.C. app. § 289." For a definition of"citizen," reference is made to the Coast Guard definition at 46C.F.R. § 67.03. Section 4.92 pertains to towing and provides only thatthe prohibition against the use of foreign vessels in towing operationsshall be enforced with respect to such operations between coastwisepoints, citing and quoting § 316(a).

Section 316(a) requires that such owner be "a citizen of the UnitedStates within the meaning of the laws respecting the documentation ofvessels" and that the vessel have a coastwise endorsement. However,§ 12106 (coastwise endorsement) has no specific requirement as to the

4 1See C.S.D. 82-74 (Customs Ruling 105369 PH 1981) (citing The Dolphin, 3 F.2d 1 (1st Cir.1925)).421n addition to § 27 (which pertains to merchandise transported between points in theUnited States embraced within the coastwise laws in a vessel) and § 316(a) (which pertains tothe tow of a vessel by another vessel between two points in the United States embraced withinthe coastwise laws), there are other laws relating to other maritime transportation activities.Among these are 46 U.S.C. app. § 289 (1988) (transport of passengers between ports or placesof the United States), 46 U.S.C. app. § 292 (1988) (dredging in the United States) and 46 U.S.C.app. § 316(d) (1988) (salvaging operations in U.S. waters). But only § 27 and § 316(a) have aspecific requirement as to the citizenship of the owner of the vessel engaging in such activityand the latter only refers generally to the documentation laws, which have no specificrequirements as to towing activities.

43 19 C.F.R. Part 4 (1993).4See supra note 42.

Vol. 25, No. 2


citizenship of the owner except as may be required under the generalprovision "otherwise qualifies under laws of the United States to beemployed in the coastwise trade." The § 2 definition of citizenshipapplies to provisions of the 1916 Act of which it is a part (and thereforeapplies to § 9) and of the 1920 Act (and therefore applies to § 27) and toother maritime laws (Merchant Marine Act of 1936, Merchant Ship SalesAct of 1946, and others) by reference, but not to § 316(a). The CoastGuard regulations apply the § 2 citizenship requirements for a coastwiseendorsement in keeping with its definition of coastwise trade, which isbased on the requirements of § 27 and which incorporates the § 2definition of citizen of the United States.4 5

Thus, because a tug towing barges is not transporting merchandisein a vessel, such a tug is not subject to § 27 and its citizenshiprequirements. The tug could obtain a coastwise endorsement if builtin the United States and if eligible for documentation under 46 U.S.C.§ 12102 (which, in the case of a corporation, requires only that it bea U.S. corporation and that certain of its officers and directors becitizens of the United States but with no requirement as to the U.S.citizenship of its stockholders). Even if § 2 were to apply in thissituation, only the general rule, the controlling interest test, of § 2should be imposed as the 75% interest requirement added in 1920 wasmeant only to cover § 27 (which is not applicable to § 316(a)). 46

Transfers of documented tugs may, however, still be subject to § 9,depending upon whether the owner and the transferee meet the § 2(a)definition of citizens of the United States.

2.1.6 Application of Section 2 to Section 27, Section 9 and the

Documentation Laws

2.1.6.1 Application to Section 27

The amendment of § 2 by § 38 of the 1920 Act increased, in the caseof a corporation which owned a vessel operating in the coastwisetrade, the amount of interest required to be owned by citizens of theUnited States from a controlling interest to a 75% interest. Thisrequirement was the result of a compromise between the provisions

4546 C.F.R. §§ 67.03-5, 67.03-9 and 67.17-5 (1992).46In general, there is little correlation between the various statutes governing coastwise

operation of vessels. Each has had a separate statutory beginning and has been amended overthe years often without regard to the enactment or amendment of other statutes. This has beencompounded by the lack of statutory definitions, such as coastwise trade. See supra note 9 at301 n.2.

173April IO94


of the bill approved by the House of Representatives and thatapproved by the Senate. 47 The bill initially passed by the Housewould have retained the controlling interest requirement contained inthe 1916 Act, as amended in 1918, with no differentiation betweencoastwise and foreign trade. The bill, as amended by the Senate,would have required 100% U.S. citizen ownership of a corporation,association, or partnership operating a vessel in the coastwise tradeand 75% ownership by U.S. citizens of such entities operating vesselsexclusively in the foreign trade.4A The compromise, as adopted in theamended § 2, retained the "controlling interest" requirement in allcases except where a corporation, partnership or association owns avessel which operates in the coastwise trade, in which case the 75%interest is required.49

Thus, the requirement that the controlling interest in a corporation,partnership or association be owned by citizens of the United Statesin order for such entity to be deemed a citizen of the United States isthe general rule of § 2. The only exception to that general rule iswhere such an entity owns a vessel operating in the coastwise trade,in which case the amount of interest required to be owned by citizensof the United States is increased to 75%.50

Section 27 sets out the eligibility requirements for a vessel toengage in the coastwise trade and its citizenship requirement appliesonly to owners of such vessels. The 75% interest exception of § 2(a)and (c) applies only to the citizenship requirement of corporations (orpartnerships or associations) that own vessels operating in thecoastwise trade. The parent or any entity whose stock is being reliedupon to establish the requisite U.S. citizenship of the owner of a

47See H. R. 10378, 66th Cong., 1st Sess. (1920).48See S. Rep. No. 573, 66th Cong., 2d Sess. 7, 9 and 10 (1920). The Senate version of the bill

provided in § 29 (which became § 27 in the 1920 Act) that a vessel engaged in the coastwisetrade must be "wholly owned by persons who are citizens of the United States." Section 41 ofthe Senate version of the bill (which became § 38 in the 1920 Act) would amend § 9 of the 1916Act to provide that "no corporation, partnership, or association shall be deemed a citizen of theUnited States unless all the stock and securities of such corporation, partnership, or associationare at all times wholly and bona fide owned by citizens of the United States .... (emphasisadded). In the following paragraph, it set out the requirements that title to all stock and of allvoting power be vested in citizens of the United States and by no other means could votingpower or control of the corporation be permitted by any person who is not such a citizen withthe proviso that "for purposes of operating vessels exclusively in foreign commerce" only 75%of the stock must be so owned. Id. at 23-24.

49H.R. Rep. No. 1107 (Conference), 66th Cong., 2d Sess. 33 (1920).50The bill as passed by the Senate would have made the "wholly owned" or 100% U.S.

citizenship requirement the general rule with the 75% requirement for vessels operatingexclusively in the foreign commerce the limited exception.

Vol. 25. No. 2


vessel operating in the coastwise trade, at each tier of ownershipabove the corporation owning such vessel, is not the owner of thatvessel. Therefore, the only possible interpretation that can be ob-tained from the wording and history of § 2(a) is that such entities needto meet, not the 75% interest exception standard but, only thecontrolling interest general rule of § 2.51

Corporations referred to in § 2 as originally enacted and asamended in 1918, prior to the addition in 1920 of the languageregarding corporations owning vessels operating in the coastwisetrade and the addition of § 2(c), are any corporations to which thedefinition in § 2(a) and (b) apply. 52 Corporations referred to in § 2(c),as added in 1920 (along with the exception added to § 2(a)), are onlycorporations which own vessels operating in the coastwise trade.

2.1.6.2 Application to Section 9

The meaning and effect of the 75% interest requirement in § 2 wereat issue in Alaska Excursion Cruises, Inc. v. United States.53 Thecase held that § 2(a) is "definitional in character" and does notexpand the privileges and restrictions of any other statute, stating inthis connection:

Section 802(a) [§ 2(a)] delineates which business entities are consideredUnited States citizens "within the meaning of this chapter." Amongother requirements, a "controlling interest" in the entity must beowned by United States citizens. For those vessels "in the coastwisetrade," however, a greater degree of United States ownership isrequired; the entity which operates them must be 75% United Statesowned in order to "be deemed a citizen of the United States" "withinthe meaning of this chapter." Section 802(a) is thus definitional in

51See Central Vermont, discussed infra notes 130-133 and accompanying text.52The terms "citizens of the United States" or "such citizens" as contained in subdivisions

(a) through (d) of § 2(b), as amended in 1918, refer to a corporate stockholder of a corporationwhich has a controlling interest in the corporation whose citizenship is determined by thecontrolling interest requirement of that section. The same terms as contained in subdivisions (a)through (d) of § 2(c), as added in 1920, refer to a corporate stockholder of a corporation whichhas a 75% interest in the corporation which owns a vessel operating in the coastwise tradewhose citizenship is determined by the 75% interest requirement of that section. However, inboth instances each parent corporation (neither of which owns a vessel operating in thecoastwise trade) has its citizenship determined by the general or controlling interest definitionof § 2(b), not the 75% interest definition of § 2(c).

53595 F. Supp. 14 (D.D.C. 1984) [hereinafter Alaska Excursion 1]. It is strange that neitherparty in its opening briefs or the court in its decision in Conoco referred to or discussed thiscase. Conoco in its reply brief did refer to it but only on the question of whether a demisecharterer is the owner of the chartered vessel. See infra note 63 and accompanying text.

175Apri 1994


character. It does not grant any privileges or impose any restrictions,but merely groups corporations, partnerships and associations intothose deemed United States citizens and those deemed non-citizens.Any privileges or restrictions which follow from this distinction must befound elsewhere in the Act.54

It is clear that the 75% interest citizenship requirement applies onlyto corporations owning vessels operating in the coastwise trade. Thephrase "the entity which operates them" does not change theownership requirement (which is imposed by § 27) and the fact thatthe 75% interest requirement applies only to the owner. Section 27requires that vessels operating in the coastwise trade be owned bycitizens of the United States but imposes no requirements as to thecitizenship of the "operator" of such vessels (where the operator isnot the owner) nor does § 2 add anything in this regard.

The position adopted by the district court in Alaska Excursion Iwas urged upon it by MarAd. 55 Proposed MarAd regulations in April1990 would have applied the 75% requirement to a "corporationowning or operating a vessel in the coastwise trade" rather than to a"corporation owning a vessel which is operating in the coastwisetrade." 56 In replacing "owning or operating a vessel" with "owninga vessel which is operated" in the interim final rule issued in 1991,MarAd stated that the change was made because:

Exception was taken to the proposed citizenship requirement in para-graph (d)(5) regarding a corporation, partnership, association or jointventure operating a vessel in coastwise trade. Commentators suggestedthat it would be in excess of statutory authority, since.46 U.S.C. app.883, the relevant authority, speaks only to ownership of vessels used inthe coastwise trade.

That is correct, and paragraph (d)(5) has been amended to clarify thatthe citizen requirement applies to the ownership of vessels operating inthe coastwise trade, not to the operator of those vessels. 57

54Alaska Excursion I at 16 (opinion by Judge Gesell) (emphasis added). This position wasconcurred in by Judge Flannery in the same case reported at 603 F. Supp. 541, 548 (D.D.C.1984) [hereinafter Alaska Excursion 11]. The case was assigned to Judge Flannery, who ruled oncertain pre-trial motions reported at 603 F. Supp. 541. In Judge Flannery's absence, JudgeGesell heard a preliminary motion for injunctive relief reported at 595 F. Supp. 14.

55Defendants' Memorandum of Points and Authorities in Opposition to Plaintiff's Cross-Motion for Summary Judgment in Alaska Excursion Cruise, Inc. v. United States of America,U.S. District Court for the District of Columbia, Civil Action No. 83-2366 (February 24, 1984),at 3-4.

5655 Fed. Reg. 14,040, 14,051 (1990) (proposed to be codified as 46 C.F.R. § 221.3(d)(5)).5756 Fed. Reg. 30,654, 30,657 (1991) (emphasis added).

Vol. 25, No. 2


Despite this recognition in its discussion of the interim final rule, inthe final rule, MarAd quoted from that discussion and then stated:

It should be understood that this change in the July 3 interim final ruledoes not mean that MARAD has somehow waived the requirement ofsection 9 that persons not qualifying as section 2 citizens requireapproval before chartering citizen-owned vessels. The statutory re-quirement imposed by section 9 that citizen owners of documentedvessels must get MARAD's approval before chartering them to personswho are not section 2 citizens could not be more clear. The section 2definition of "Citizen of the United States" is equally clear. As thatdefinition applies to section 9, a person operating a vessel in thecoastwise trade is not a citizen unless at least 75% of the ownershipresides in citizens. 58

In support of this position, MarAd quoted the above language fromAlaska Excursion I with respect to "the entity which operates them,"while ignoring the admonition of that court that § 2(a) "does not grantany privileges or impose any restrictions" and that "[a]ny privilegesor restrictions which follow from this distinction must be foundelsewhere in the Act." 59 This restriction certainly cannot be found in§ 27 to which the § 2 definition applies, for § 27 clearly applies onlyto the owners of vessels operating in the coastwise trade. It is clearthat the court in Alaska Excursion I, as urged by MarAd, applied the75% requirement only to the owner and not to the operator (where theowner is not the operator) of vessels engaged in the coastwise trade.

In the case of a sale of a vessel documented with a coastwiseendorsement, § 9 approval is not required if the transferee satisfiesthe "controlling interest" requirement. However, the transferee, if itdoes not satisfy the "75% interest" requirement, could not then asowner continue to have the vessel documented with a coastwiseendorsement since it does not meet the 75% interest required ofowners of vessels operating in the coastwise trade. However, this isa matter subject to the jurisdiction of the Coast Guard as the agencyresponsible for the administration of the documentation laws, not ofMarAd in applying § 9. Approval by MarAd under § 9 does notoperate to waive any requirements for documentation. Likewise, acharter of a vessel documented with a coastwise endorsement (itsowner meets the 75% interest requirement) to a person satisfying thecontrolling (majority) interest but not the 75% interest requirementdoes not require § 9 approval, even if the charterer thereafter

5857 Fed. Reg. 23,470, 23,472 (1992) (emphasis added).59Alaska Excursion I at 16.

177April 1W


operates that vessel in the coastwise trade since the charterer is notthe owner of such vessel.

Thus, for purposes of § 9, MarAd, in applying the definition of"citizen of the United States" to a documented vessel "owned by acitizen of the United States" transferred to a person not a "citizen ofthe United States," must apply the "controlling interest" test in§ 2(a) and (b) to the owning corporation and to the transferee. Thistest will apply regardless of the citizenship requirements for docu-mentation of the vessel.

If the controlling interest of a corporation owning a vessel docu-mented with a registry endorsement (which does not require that anyof the corporation's shareholders be citizens of the United States) isin fact owned by citizens of the United States, then a transfer of thatvessel is subject to the approval requirements of § 9. If the corporateowner's controlling interest is not owned by U.S. citizens, thenMarAd approval would not be required.

In order to place § 2 citizens on a par with documentation citizenseligible to document vessels pursuant to § 12102 but who may not be§ 2 citizens and who may transfer their vessels to noncitizens withoutapproval by MarAd, MarAd determined in its interim final rule that,for § 9 purposes, "it is appropriate to grant general approval for thesale, mortgage, lease, charter, etc. (but not transfer of registry) ofcitizen-owned vessels [to noncitizens] so long as the country is not atwar, there is no Presidential declaration of national emergency andthe noncitizen is not subject to the control of a country with whomtrade is prohibited." 6 This determination was continued in the finalrule with certain exceptions (including demise charters to non-section2 citizens of vessels operating in the coastwise trade). 61

With respect to transfers, whether a sale (transfer of the owner-ship), a mortgage 62 or a charter of a vessel, the controlling interest

6056 Fed. Reg. 30,654; 30,655; 30,677-78 (1991) (to be codified, with certain exceptions, at 46

C.F.R. § 221.13(a)).6 1Supra note 58 at 23,470-1 and 23,481, 46 C.F.R. § 221.13(a) (1992). This does not affect a

partnership, all general partners of which must be U.S. citizens and the controlling interest ofwhich must be held by U.S. citizens, or an association, all of whose members must be U.S.citizens, not just a controlling interest held by U.S. citizens. Supra note 37. If the vessel has acoastwise endorsement, which requires ownership of 75% of the stock of a corporation by U.S.citizens, then that corporate owner will, of course, satisfy the controlling interest requirementof§ 9.

6246 U.S.C. § 31322(a)(l)(D) (1988) provides that a preferred mortgage is a mortgage that hasas the mortgagee "(v) a person qualifying as a citizen of the United States under section 2 of theShipping Act, 1916 (46 App. U.S.C. 802)." Section 27 applies to the owner, not the mortgagee,of a mortgaged vessel. For § 9 purposes MarAd is not concerned with whether a 75% or onlya controlling interest of the corporate mortgagee is owned or controlled by U.S. citizens.

Vol. 25, No. 2


standard or general rule will apply. Irrespective of the generalapproval granted by MarAd in § 221.13, if the purchaser, the mort-gagee or the charterer meets the controlling interest standard, MarAdapproval is not required by statute.

A charterer is the operator, not the owner (to which the 75%interest test applies) of a vessel. If a bareboat charterer, by reason ofprovisions in the charter or otherwise, is considered the "owner" ofa vessel, however, then, unless the charterer (as owner) meets the75% interest test, the vessel could not be documented in the name ofthe charterer (as owner) with a coastwise endorsement. Furthermore,even if MarAd approved the charter, the vessel could not be operatedin the coastwise trade due to § 27 and the documentation require-ments for owners of vessels operating in the coastwise trade. Inanother decision involving the Alaska Excursion Cruises v. UnitedStates case, it was held that "a bareboat charter to a noncitizen is notper se illegal simply because such an arrangement typically transfersa considerable degree of control over the chartered vessel" but onlyif the terms and conditions "indicate whether so many of the indiciaof ownership have been transferred that the charterer has become the'owner' for purposes of the Shipping Act." 63 Thus, the citizenshiprequirements of § 27 are generally not an issue for charterers. Ifanything, the term "or control of' (a documented vessel), as addedto § 9(c) by the 1988 amendment, might be applicable to a bareboator demise charter, but not the term "controlling interest" as to thetransferee or charterer. 64 However, transfer of "control" of a vessel,if made to a corporation whose "controlling interest" (but not 75%interest) is owned by citizens of the United States, would not subjectsuch charter (transfer) to MarAd approval under § 9(c)(1).

2.1.6.3 Application to the Documentation Laws

Section 12106(a) provides that a certificate of documentation mayhave a coastwise endorsement for a vessel that "is eligible fordocumentation" and "otherwise qualifies under the laws of theUnited States to be employed in the coastwise trade." Section 12102provides the requirements for vessels to qualify for documentationand § 27 provides the requirements for vessels to qualify to engage in

63AIaska Excursion Cruises, Inc. v. United States, 608 F. Supp. 1084, 1088 (D.D.C. 1985)[hereinafter Alaska Excursion i1] (the third opinion in this case, also by Judge Flannery). Supranote 54.

64Supra note 32. See also infra notes 110-114 and accompanying text.

179April 1994


the transportation of merchandise in the coastwise trade. Theserequirements are fairly clear and generally are reflected in the CoastGuard regulations implementing the documentation statutes. Like Ma-rAd,65 the Coast Guard looks at the citizenship of each entity in the tierof ownership. However, where MarAd requires that each entity in thattier meets the § 2 citizenship requirements, the Coast Guard-requiresthat any entity owning an interest contributing to the citizenship quali-fication of another entity must be "a citizen eligible to document vesselsin its own right with the trade endorsement sought."66 This regulationhas no statutory authority in § 2 or otherwise.

The Coast Guard has stated that the purpose of § 67.03-2(b) is toprevent "easy circumvention" of the intent and effect of the 75%interest requirement for the owner of a vessel engaging in thecoastwise trade by allowing entities that own such 75% interest inturn to be owned by citizens who own only a controlling interest.67

However, when Congress in 1983 codified various laws relating tovessels, including the Vessel Documentation Act, the report of theSenate Committee on Commerce, Science and Transportation notedthat "[t]he citizenship provision in § 12104 [§ 12102 as enacted], the'Vessels eligible for documentation' section, remains unchanged, butthe Committee wishes to note the conflicting interpretation of thecorporate citizenship requirements of § 12104(4) of this bill as itrelates to Section 2 of the Shipping Act of 1916. Such ambiguitymerits further attention. In the interest of expedition, we do not nowaddress this issue, but intend to do so." 68

In 1990, while considering the appropriation for fiscal year 1991 tobe authorized for the Maritime Administration, the House Committeeon Merchant Marine and Fisheries noted the Coast Guard's applica-tion of § 12102(a)(3)'s requirement that all general partners of apartnership be citizens of the United States in order for a vesselowned by the partnership to be documented to the definition ofCitizens of the United States in § 2, and commented as follows:

During debate on H.R. 4205, Congressman Young suggested a clarifi-cation as to Congressional intent when agencies implement and inter-

f5See supra note 33 and accompanying text.6646 C.F.R. § 67.03-2(b)(1991). By notice of proposed rulemaking (CGD 89-007), 57 Fed.

Reg. 10,544 (1992), this regulation would be recodified as § 67.31(b).67 Final rule (CGD 88-031), 55 Fed. Reg. 51,244, 51,247 (1990). The explanation of the Coast

Guard is not clear since it seems to confuse the documentation requirements of 46 U.S.C.§ 12102 and the controlling interest requirements of 46 U.S.C. app. § 802(a) (§ 2(a)), but therationale is the same.

68S. Rep. No. 98-56, 98th Cong., 1st Sess. 21 (1983).

Vol. 25, No. 2


pret the citizenship requirements for ownership of certain vessels ascontained in chapter 121, title 46 of the U.S. Code. Section 12102 ofTitle 46 addresses the citizenship of the documenting entity itself.Section 12106 then requires that, for coastwise licensing, the entitydocumenting a vessel must, in turn, qualify for coastwise service underother applicable laws. As an example, a vessel is permitted by section12102 to be documented by an owning U.S. corporation havingqualified officers and directors without regard to the stock ownership ofthe corporation; to engage in the coastwise trade, sections 802 and 883of title 46 require 75% of the stock of the corporation to be owned byU.S. citizens.

Rules proposed by Department of Transportation agencies mix thesecarefully separated strands together. The rules apply to a corporationauthorized by section 12102 to document a vessel and set out thefurther requirements for a coastwise license. They not only requireownership of 75% of the stock by U.S. citizens (as set out in section802), but also require that if any of the corporation's qualifying stock isowned by a partnership, all the general partners of the partnership mustbe U.S. citizens. This additional requirement does not appear in section802 but seems to be drawn from the partnership documenting require-ments in section 12102. The latter requirements are not, however,applicable to stockholders of corporations that own vessels; partner-ships owning stock in a vessel-owning corporation need only meet the75% controlling interest standard of section 802.

Congress never intended to alter the historic distinction betweenownership of the vessel for purposes of documentation and ownershipof the vessel-owning entity for purposes of licensing. Accordingly,whether a stockholder of a corporation that owns a coastwise vessel isa citizen is determined by section 802, not section 12102.

The Committee further stated that it "views section 12106 as notinterfering with the distinction discussed above and concludes thatthis explanation should be sufficient to guide the agencies in theirrulemaking." 69 These comments were noted but ignored by the CoastGuard in its final rule.70

Citizenship requirements for documentation of a vessel owned bya partnership under § 12102(a)(3) and of an association under§ 12102(a)(2) are different from, and more stringent than, those of § 2.However, the citizenship requirement for documentation of a vesselowned by a corporation under § 12102(a)(4) is different from, and lessstringent than, that of § 2(a) and (b). For a coastwise endorsement of

69 H.R. Rep. No. 101-487, 101st Cong., 2d Sess. 11-12 (1990).7°Final Rule (CG 88-031), 55 Fed. Reg. 51,244, 245-246 (1990). See supra note 67 and

accompanying text.

April 1994


a documented vessel owned by a corporation under § 12106(a), thecitizenship requirement is the same as that of § 2(a) and (c) because§ 12106(a)(3) stipulates that the vessel "otherwise qualif[y] under thelaws of the United States to be employed in the coastwise trade,"which refers to, among others, the requirements of § 27 and, there-fore, of § 2.

The requirements of § 27 apply only to the citizenship of the ownerof the vessel operating in the coastwise trade. 71 Citizenship of theowner is the only determination to be made by the Coast Guard inconnection with the documentation of a vessel. Any entity in the tierof ownership above the corporation (or partnership or association)owning the vessel is required to meet only the general rule ofcitizenship of § 2(a), that of controlling interest, and not either thecitizenship requirements for the owner of a vessel operating in thecoastwise trade, as set out in the exception to the general rule in§ 2(a) and (c), or the requirements for an entity to document a vesselin its own right with a coastwise endorsement as required by theCoast Guard. Thus, in the case of such corporations, only a "con-trolling interest," not a "75% interest," is required; in the case ofpartnerships, only a "controlling interest," not "all general part-ners," is required; and, in the case of associations, only a "control-ling interest," not "all members of the association," is required.

2.2 Bowaters Amendment

2.2.1 Citizenship of a Bowaters Corporation

The Bowaters Amendment, adopted in 1958, added § 27A to the1920 Act, and provides, in part, as follows:

Notwithstanding any other provision of law, a corporation incorporatedunder the laws of the United States or any State, Territory, District, orpossession thereof, shall be deemed to be a citizen of the United Statesfor the purposes of and within the meaning of that term as used insections 9 and 37 of the Shipping Act, 1916, as amended (46 U.S.C. 808,835), section 27 of the Merchant Marine Act of 1920, as amended (46U.S.C. 883), Revised Statutes, section 4370 (46 U.S.C. 316), and thelaws relating to the documentation of vessels, if it is established by acertificate filed with the Secretary of the Treasury as hereinafterprovided, that [setting out certain requirements]. 72

71See supra notes 34-35 and accompanying texts.72Supra note 3 (emphasis added).

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The bill that subsequently became § 27A, H.R. 9833, as originallyintroduced, was an amendment to § 27 in the form of a proviso to theeffect that § 27 would not apply to transportation in barges and towingvessels built in and documented under the laws of the United Statesand owned by a corporation meeting the requirements set out in thesubsequently adopted Bowaters Amendment. If adopted in this form,the proviso would have replaced the three requirements of § 27 withits own three requirements, two of which, built in and documentedunder the laws of the United States, were the same. However, the§ 27 requirement that vessels be owned by persons who are citizensof the United States would have been replaced by a requirement ofownership by a corporation meeting the requirements of the provisowhich had no citizenship requirement for stockholders of the corpo-ration.73

In letters to the House Committee to which the bill was referred,the Secretaries of both Commerce and Treasury pointed out that thebill as introduced would not achieve its purpose because of conflictswith other laws, referring specifically to the documentation laws and§§ 2, 9 and 37.74 To meet these objections, all provisions after theenacting clause were struck and, in lieu thereof, the 1920 Act wasamended by adding a new section 27A to contain the language asfinally adopted.

The Committee recognized that Bowaters, a domestic corporation,by reason of control by non-U.S. citizens was not eligible for"operation and ownership" of vessels in the U.S. domestic trades.To rectify this situation, the bill was meant to authorize operation inthe U.S. domestic trade of non-self-propelled barges and certainsmall self-propelled vessels in the transportation of merchandise andpassengers owned by corporations which are not U.S. citizens under§ 2 of the 1916 Act, but which meet the standards set out in the bill.75

A mere proviso to § 27 exempting Bowaters (as well as Shell andsimilarly situated corporations) from its provisions would not achievethe desired results without specifically considering §§ 2, 9 and 37 ofthe 1916 Act, § 27, the documentation laws and laws relating totugboats. Except for § 2, this could easily have been done by simplyproviding that, as to those laws, a corporation meeting the require-ments of the amendment would be deemed a citizen of the UnitedStates. Because the citizenship requirements of §§ 9, 37 and 27 derive

73H. Rep. No. 2270, 85th Cong., 2d Sess. (1958).741d. at 6-13.751d. at 2-3.

183.Aprl 1994


from § 2, a proviso to § 2 could have exempted Bowaters from itsprovisions. However, because § 2 also applies to other laws (such asthe 1936 Act) but not the documentation laws or § 316(a), the bettermethod was to apply the citizenship provision only to the specificlaws deemed necessary. To make certain that § 2 or any other lawthat might be involved did not frustrate the purpose of the amend-ment, the language "[n]otwithstanding any other provisions of law"was placed at the beginning of the amendment. Thus, a Bowaterscorporation would be "deemed a citizen of the United States for thepurposes of and within the meaning of that term as used in" §§ 9, 37 and27 and would replace the definition of that term in § 2 otherwiseapplicable to these sections. Likewise, a Bowaters corporation would beso treated for the purposes of the documentation laws and § 316(a) andwould replace any law or definition otherwise applicable in that regard.

The Bowaters Amendment neither applies to nor affects § 2 and aBowaters corporation is not deemed a citizen of the United States forthe purposes of and within the meaning of § 2, unless it separatelyqualifies as such a citizen. However, it is quite clear that a Bowaterscorporation is deemed a citizen of the United States for the purposesof and within the meaning of that term as used in the four identifiedlaws without reservation or limitation. Thus, where a Bowaterscorporation seeks to document a vessel it owns under U.S. laws witha coastwise endorsement, the "deemed citizen of the United States"provision of the Bowaters Amendment will replace the citizenshiprequirements in § 12102(a)(4) for purposes of the documentation lawsand in § 2 for purposes of § 27.76

The Bowaters Amendment provides that a corporation seeking todocument a vessel under the laws of the United States pursuant tothat Amendment shall file with the Secretary of the Treasury of theUnited States77 a certificate under oath, establishing that such corpo-ration complies with the conditions required by the Amendment.

76A Bowaters corporation, in addition to the requirements that it be incorporated under the

laws of the United States or a subdivision thereof, which is also a requirement of § 2(a) and of§ 12102(a)(4), must have as a majority of its officers and directors citizens of the United States;whereas 2(a) and § 12102(a)(4) require that the president or other chief executive officer and thechairman of its board of directors be such citizens and that no more of its directors than aminority of the number necessary to constitute a quorum may be noncitizens. Like§ 12102(a)(4), there is no requirement that any interest in a Bowaters corporation be owned bycitizens of the United States; whereas § 2 requires that a controlling or 75% interest in acorporation be held by U.S. citizens for it to be considered a U.S. citizen.

77This function is now performed by the Coast Guard. 46 C.F.R. Part 68, § 68.01-5 (1992).The same procedure applies to formally qualify a parent or subsidiary of a Bowaterscorporation. 46 C.F.R. § 68.01-7 (1992).

Vol. 25, No. 2


When this certificate has been filed, the Coast Guard will furnish thecorporation with a Certificate of Compliance. 78 With the filing of anapplication for a Certificate of Documentation accompanied by theCertificate of Compliance, and compliance with normal documentationrequirements, any vessel of the type described in the Amendmentowned by a Bowaters corporation may be issued a Certificate ofDocumentation with a coastwise endorsement subject to the Amend-ment's restrictions. 79 Such a vessel may have its Certificate of Docu-mentation simultaneously endorsed with as many endorsements as it isqualified for, including operation under the Bowaters Amendment.80

There is no need to look to the citizenship of any parent corpora-tion or entity of a Bowaters corporation to determine its citizenshipand whether such corporation is entitled to document vessels with acoastwise endorsement. In fact, the whole purpose of the BowatersAmendment was to get around the fact that the parents of BowatersSouthern Paper Corporation and of Shell Oil Co. were noncitizens,thus preventing those two subsidiary U.S. corporations from owningvessels documented under U.S. laws with coastwise privileges.

The Coast Guard is charged with responsibility for documentationof vessels under the vessel documentation statutes, which normallyinclude the requirements of § 27 for coastwise endorsements. This inturn requires the application of the § 2 definition of citizens of theUnited States to determine whether the U.S. citizenship requirementof § 27 is met. However, in the case of documentation of vesselsowned by a Bowaters corporation, the § 2 definition has beenreplaced by the Bowaters Amendment definition of U.S. citizens forpurposes of § 27 and of the documentation laws and has no applica-tion in determining if such vessels qualify to be documented with acoastwise endorsement.

MarAd is charged with responsibility for the administration of § 9,which normally requires the application of the definition in § 2 todetermine the U.S. citizenship of the owner of a vessel beingtransferred and of the transferee. Again, however, in the case oftransfers of vessels owned by or to a Bowaters corporation, the § 2definition is replaced by the "deemed citizen" provision of theBowaters Amendment. Despite this fact, MarAd, in its regulations

784 6 C.F.R. § 68.01-5(b) (1992).7946 C.F.R. §§ 68.01-17 and 68.01-11 (1992).8OCoast Guard regulations specify that vessels employed subject to the Amendment are

"entitled to operation only in the coastwise trade" within the prescribed limitations. 46 C.F.R.§ 68.01-15(a). However, other regulations allow multiple endorsements on the document. 46C.F.R. 99 68.01-3, Note and 67.17-1(c).

185AMI I994


implementing § 9, has defined a Bowaters corporation as "a Nonci-tizen corporation organized under the laws of the United States or ofa State that has satisfied the requirements of 46 U.S.C. app. 883-1(a)-(e) and holds a valid Certificate of Compliance issued by the CoastGuard.' '81 This is directly contrary to the specific provisions of theBowaters Amendment.

Thus, for purposes of § 9, a Bowaters corporation shall be deemedto be a citizen of the United States where such a corporation owninga documented vessel makes one of the transfers specified in § 9(c)(1)of that vessel to a person not a citizen of the United States. Thus, thesale, mortgaging, chartering or the transferring in any manner to aperson not a citizen of the United States of any interest in or controlof a documented vessel owned by a Bowaters corporation is subjectto MarAd approval under § 9(c)(1). However, the sale, charter ortransfer of any interest in or control of a documented vessel owned bya citizen of the United States to a Bowaters corporation is not subjectto approval of MarAd under § 9(c)(1).

2.2.2 Chartering Vessels By and To Bowaters Corporations

The Bowaters Amendment provides: (1) the requirements to qual-ify as a Bowaters corporation, (2) that such a corporation shall bedeemed to be a citizen of the United States for the purposes of andwithin the meaning of that term as contained in the five specifiedstatutory sections, (3) the definition of a parent or subsidiary of sucha corporation, and (4) that vessels "owned" by any such corporationare prohibited from engaging in the fisheries or in the transportationof merchandise or passengers for hire in the coastwise trade except asa service for a parent or a subsidiary corporation and except whensuch vessel is under demise or bareboat charter at prevailing rates foruse otherwise than in the domestic noncontiguous trades to a com-mon or contract carrier meeting certain conditions. 82

By providing that vessels owned by such a corporation are re-stricted as to their use, it is implied that such corporations can acquirea vessel by purchases from others. If such a purchase involved adocumented vessel owned by a U.S. citizen, then the sale by thatowner would be subject to MarAd approval if the acquiring Bowaters

8146 C.F.R. § 221.3(a) (1992) (emphasis added). However, subsection (n) of the same

regulation defines a "Noncitizen" as "a Person who is not a citizen of the United States." ABowaters corporation may be a "non-section 2 citizen" where that section applies but is acitizen where the Bowaters Amendment applies and its definition replaces that of § 2.

82Section 27A, the last portion of the first unnumbered paragraph.

Vol. 25, No. 2

corporation was not deemed a citizen of the United States forpurposes of § 9. MarAd has recognized this possibility and has heldthat such a transfer would not be subject to its approval despite itsdefinition of a Bowaters corporation as a "noncitizen. "83

Because § 9 applies to charters of documented vessels owned bycitizens of the United States to a noncitizen and § 9 is referred tospecifically in the Bowaters Amendment without limitation, it alsocan be implied that Bowaters corporations can charter vessels andthat the chartering of a documented vessel to such a corporationwould not be to a noncitizen and would not require MarAd approvalunder § 9.84

Vessels owned by Bowaters corporations are restricted in thetransportation of merchandise for hire between coastwise points toservice for a parent or a subsidiary corporation.8 5 Another exceptionin the use of Bowaters corporation owned vessels is the demise orbareboat chartering of such vessels at prevailing rates to common orcontract carriers under the Interstate Commerce Act (which; by theterms of the Amendment, also must be a § 2 citizen, and thus noapproval by MarAd would be required) for use otherwise than in thedomestic noncontiguous trades (i.e., those places outside the lower48 States). Although not clearly stated, because a Bowaters corpo-ration itself could perform such transportation, it appears that aBowaters corporation could charter its vessels to a parent or subsid-iary corporation for transportation of their own cargo and such acharter would not be subject to MarAd approval. If a Bowaterscorporation carries the products of the parent or subsidiary itself(without charter to such parent or subsidiary), it is also implied thatit can charge for the hire and need not charter the vessels for such useat prevailing rates to a common or contract carrier under theInterstate Commerce Act. Because: (a) a vessel owned by a Bowa-

83Supra note 81.

84MarAd has granted general approval to the transfer of documented vessels owned by § 2

citizens to noncitizens. Supra notes 60 and 61. However, it made this general approval subjectto a few exceptions, among which are transfers to Bowaters corporations (which it defined asa "noncitizen") of vessels operating in the coastwise trade (46 C.F.R. § 221.13(a)(l)(i)), but theexceptions do not apply to time charters to such corporations (46 C.F.R. § 221.13(b)(4)). Thisregulation is directly contrary to the Amendment and arises from MarAd's definition of aBowaters corporation as a "noncitizen" for § 9 purposes.

85Section 27A does not specifically state that a vessel owned by such corporation may ormay not engage, or is in any way restricted, in the transportation of its own products betweencoastwise points. However, it can be assumed from requirements (c), (d) and (e) of the firstunnumbered paragraph that the corporation must meet in order to qualify as a Bowaterscorporation that this was an original purpose of that Amendment and that no exception for thispurpose was needed.

187Citizen of the United StatesApril 1994


ters corporation can be demise or bareboat chartered under limitedcircumstances to a § 2 citizen, and (b) a charter may be subject to theapproval requirements of § 9, then by reference to § 9 in the Bowa-ters Amendment, it is implied that: (1) a vessel may be chartered aswell as sold to such a corporation, and (2) a vessel owned or charteredby such a corporation may be chartered to certain others, subject tothe limitations on use in the exceptions in the Amendment.

A reasonable interpretation of the Bowaters Amendment wouldrecognize that: (1) a vessel owned by such a corporation may engage inthe transportation of its own merchandise or products between coast-wise points, (2) a vessel owned by such a corporation may transportmerchandise or products of its subsidiary or parent in the coastwisetrade, either as a service for hire or by charter of the vessel to the parentor subsidiary for the sole carriage of the merchandise or products of suchparent or subsidiary, (3) a vessel owned by such corporation may bedemise or bareboat chartered at prevailing rates for use otherwise thanin the domestic noncontiguous trades to a common or contract carrierunder the Interstate Commerce Act for the carriage of its products or theproducts of its parent or subsidiary or of any merchandise for any otherparty as a common or contract carrier, and (4) a Bowaters corporationmay charter in vessels documented under U.S. laws with a coastwiseendorsement without MarAd approval.

III.

ANALYSIS OF COURT'S DECISION

3.1 Facts of Case

3.1.1 Relationship of Parties

Conoco is a U.S. corporation which, the decision infers, meets therequirements for documentation of its vessels under the U.S. docu-mentation laws, except for the citizenship of its parent corporation. Itis engaged in the production, transportation, refining and marketingof petroleum and petroleum products. It is wholly owned by Du PontEnergy Company ("Energy"), a U.S. corporation which may meetthe requirements to document vessels under U.S. laws with acoastwise endorsement if its officers and directors meet the corporatecitizenship requirements and its parent corporation is a U.S. citizen.Energy is a wholly owned subsidiary of Du Pont.

Du Pont is a U.S. corporation, which has a certificate of compli-ance as a Bowaters corporation. Of Du Pont's stock, 24.5% is owned

Vol. 25, No. 2


by JES Development, Inc. ("Development"), a corporation whosecitizenship is not disclosed, and .59% is held by stockholders withregistered addresses outside the United States. Development is awholly owned subsidiary of Joseph E. Seagram & Sons, Inc., aCanadian corporation ("Seagram"). Thus, Du Pont is not considereda citizen of the United States for purposes of the 75% interestrequirement of § 2. As such it cannot document vessels it owns underthe U.S. documentation laws with coastwise endorsements. 86

However, pursuant to the Coast Guard documentation regulations,Du Pont is not eligible to document vessels in its own right with acoastwise endorsement and, therefore, Conoco (the lowest corpora-tion in the ownership tier to which the intervening corporations,culminating in Du Pont, contribute the 75% interest required for it tobe able to document its own vessels with coastwise endorsements)does not qualify for such documentation of its vessels. Also, Du Pontand the other intervening corporations in the ownership tier betweenDu Pont and Conoco do not meet the 75% interest requirement of theMarAd regulations implementing § 9 and, therefore, Conoco does notqualify as a citizen of the United States. 87

3.1.2 Activities of Parties

Du Pont owned thirty-two bulk liquid chemical barges with limitedcoastwise endorsements and had on bareboat or demise chartertwelve additional such barges. It used these barges to transport itschemical products between its own facilities and occasionally to itscustomers. Each of these barges was dedicated to transportation of asingle chemical product to avoid the necessity of cleaning the bargesbetween trips.

Conoco owned seventeen tank barges and ten pushboats (tugs ortowboats) with coastwise endorsements and had on bareboat charterone pushboat and nine tank barges. In 1990, Conoco used itscoastwise vessels to carry 27 million barrels of crude and refinedpetroleum products, including approximately 10 million barrels that itcarried for unrelated third parties for which it received compensation.

However, under the fair inference rule, Du Pont would be considered a citizen of theUnited States under the controlling interest requirement of § 2(a) and (b), assuming that DuPont meets the documentation and § 2(a) citizenship requirements for its officers and directors.

87However, because the controlling interest requirement of § 2(a) applies in all § 9 cases (seesupra part 2.1.6.2), then Du Pont is a citizen of the United States for § 9 purposes and so isConoco.

AMI 19M


Its own products were carried either between its facilities or to itscustomers.

3.1.3 Status of Parties

Du Pont has a certificate of compliance making it a citizen of theUnited States for purposes of §§ 9 and 27 and of the documentationlaws of the United States. 88 Conoco qualifies as, but has not appliedfor a certificate of compliance so as to be considered, a Bowaterscorporation. 89 Conoco contended that it was a citizen of the UnitedStates for purposes of §§ 27 and 9. This contention was based on thepremise that the corporations in Conoco's tier of ownership needed tomeet only the controlling, not the 75%, interest requirement of § 2.Du Pont and Conoco argued: (a) that only the controlling interestrequirement is applicable to such corporations, (b) that Du Pont, theultimate parent corporation of Conoco, meets the controlling interestrequirement, even under the 65% requirement of the fair inferencerule, and (c) that, therefore, Conoco, more than 75% of whose stock(interest) is held by Energy, a U.S. citizen, whose controlling interestin turn, as well as that of other corporations above it in the tier ofownership, is held by citizens of the United States, is entitled todocument vessels it owns with coastwise endorsements and is acitizen of the United States for purposes of § 9.

3.2 Court's Holdings

The court stated that on the merits there were two separate butinterrelated issues:90 (1) whether the parent of a subsidiary whichowns a coastwise vessel must itself satisfy the 75% citizenship

8If Du Pont was not certified as a Bowaters corporation, it still might be possible for it todocument vessels owned by it with coastwise endorsements. Because 24.5% of Du Pont's stockis held by Development, a subsidiary of Seagram, a Canadian corporation, not more than .5%of the remaining stock of Du Pont may be held by noncitizens. However, since the Coast Guarddoes not recognize the fair inference rule, it is highly doubtful that under the circumstances theCoast Guard would document vessels owned by Du Pont with coastwise endorsements withoutfurther proof that 75% of its stock is owned by U.S. citizens.

"Although the court fails to provide an explanation as to why no such application was madeby Conoco, it was probably due to the fact that Conoco was of the opinion that it satisfied thecitizenship requirements for documenting its owned vessels with coastwise endorsements anddid not want its use of these vessels limited if it had them documented under the provisions ofthe Amendment.

9tThe appeals court initially decided whether jurisdiction of the case was in the district courtor the court of appeals under the Hobbs Act. It held that jurisdiction was in the court of appeals.Conoco at 1213, 1216. That portion of the decision is not reviewed here.

Vol. 25, No. 2


requirements of § 2; and (2) whether a Bowaters corporation hasunfettered authority to bareboat charter vessels from other corpora-tions for the transportation of non-proprietary cargo as a commoncarrier.91 The first issue involved an interpretation of § 2 as applied to§ 27 and the second issue involved an interpretation of § 27A asapplied to § 9.

3.2.1 Citizenship Requirements For a Parent Corporation WhoseSubsidiary Corporation Owns a Vessel Operating in the Coastwise Trade

Du Pont has no parent corporation (that is a corporation that holdsa majority or 75% interest in it). However, aside from its status as aBowaters corporation, it may not be possible for it to prove that a75% interest in it is held by citizens of the United States. If it cannotprove this, it cannot then document vessels owned by it withcoastwise endorsements. However, Du Pont has received a certifi-cate of compliance certifying that it is a Bowaters corporation and,therefore: (a) it is deemed a citizen of the United States for § 9 and§ 27 purposes, (b) vessels owned by it can be documented withlimited coastwise endorsements, (c) it can charter vessels fromothers, and (d) it can bareboat charter its owned or chartered vesselsto others. 92 Thus, this portion of the opinion, in effect, deals with thecitizenship of the corporate parents of Conoco.

3.2.1.1 The Language of Section 2 is Ambiguous93

The court initially observed that:

In determining whether the Marad regulation is valid, we look first atthe language of section 2 and the plain meaning of that language. 94

The court, in construing section 2, followed the usual rules ofstatutory construction and controlling cases. Courts must look at thelanguage of a statute and the plain meaning of that language95 with the

91Conoco, 970 F.2d at 1216, 1992 AMC at 2828.

92See supra notes 82-85 and accompanying and following text.93The subheadings in this discussion of the court's holding follow the points raised by the

court's discussion of the issues.94Conoco, 970 F.2d at 1216, 1992 AMC at 2829. Although the court looked to § 2 in determining

the validity of the MarAd regulation, such interpretation would also apply to the Coast Guardregulation. However, it was not so treated in the court's decision because the petition for revieworiginally filed in that court did not ask for review of the Coast Guard regulation.

9Id.

191April 1994


assumption that the legislative purpose is expressed by the ordinarymeaning of the words used. 96 Also, and most importantly in ascer-taining the plain meaning of the statute, the court must look to notonly the particular statutory language at issue but also the languageand design of the statute as a whole.97 If, after that initial inquiry, thecourt determines that the statute is unambiguous, its inquiry is overbecause courts and agencies must follow the clearly expressed intentof Congress. 98

However, if the statute is silent or ambiguous with respect to thespecific question addressed by the regulations, the court then examinesthe agency interpretation under Chevron and other cases to determinewhether the agency's construction of the statute is permissible, conflictswith the plain language of the statute, is reasonable, and whether thecurrent interpretation is consistent with its previous interpretations. 99

The Conoco court proceeded under these guidelines to examine § 2and stated that it "must first determine whether the language ofsection 2 on its face applies the 75% citizenship requirement to parentcorporations.' ' 00 It noted that the government argued that themeaning of § 2 is ambiguous and the court should defer to MarAd'sinterpretation; whereas Conoco contended that § 2 is not ambiguous,thus, no such deference is required. After stating the question and thepositions of the parties, the court then found that:

[T]he wording of section 2 is incomplete since it merely states that "inthe case of a corporation, association, or partnership operating anyvessel in the coastwise trade the amount of interest required to beowned by citizens in the United States shall be 75 per centum." 46U.S.C. App. § 802(a). Section 2 does not address whether the parent ofthe subsidiary must also meet this citizenship requirement.' 0'

Although the court, in referring to the wording of § 2, appears to bediscussing the entire section, it addresses only the exception insubsection (a), the case of a corporation "operating any vessel in thecoastwise trade." In so addressing the issue, the court ignored

9Id. (quoting Immigration and Naturalization Service v. Elias-Zacharias, 112 S.Ct. 812, 816

(1992)). See also Mills Music, Inc. v. Snyder, 469 U.S. 153, 164 (1985).97Id. (quoting K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291 (1988)).98id. (quoting Board of Governors, FRS v. Dimension Fin. Corp., 474 U.S. 361, 368 (1986),

--which quoted from Chevron, USA, Inc. v. Natural Resources Defense Council, Inc., 467 U.S.837, 842-43 (1984) [hereinafter Chevron]). See also Tennessee Valley Authority v. Hill, 437U.S. 153, 187 n.33 (1978), and Rubin v. United States, 449 U.S. 424, 430 (1981).

"Conoco, 970 F.2d at 1216-1217, 1992 AMC at 2829.'°°Conoco, 970 F.2d at 1217, 1992 AMC at 2829-2830.'01Id.

Vol. 25, No. 2.


entirely the general, or controlling interest, rule of § 2(a) and (b). Thiswas a fundamental flaw in the court's decision. It ignored theadmonition in K Mart, which it quoted in its opinion, 02 that thelanguage and design "of the statute as a whole" must be looked to aswell as the statutory language at issue. The court found that the"wording of § 2 is incomplete" because the language quoted fromthe exception (in § 2(a), not all of § 2) "does not address whether theparent of the subsidiary [corporation operating a vessel in thecoastwise trade] must also meet this [75%] citizenship requirement."Thus, two conclusions can be drawn that are contrary to that of thecourt: (1) the 75% interest requirement does not apply to a parentcorporation because the exception applies only to the subsidiarycorporation that owns the vessel which operates in the coastwisetrade; and (2) one must look elsewhere in § 2 to determine thecitizenship requirement, if any, for such parent corporation.

The 75% interest requirement of § 2(a) and (c) is an exception to thegeneral rule of § 2(a) and (b), the controlling interest requirement. 103The latter applies in all cases involving the meaning of citizens of theUnited States except the sole case of corporations which own vesselsoperating in the coastwise trade. The exception in § 2(a) and (c) doesnot refer to parents of corporations owning vessels operating in thecoastwise trade and, therefore, applies only to the corporationsactually owning such vessels. However, § 2(a) (without the excep-tion) and (b) apply to all other corporations, which include parents ofcorporations owning vessels operating in the coastwise trade. Byfocusing on the exception and ignoring the general rule, the courtviolated a basic rule of statutory construction that the language andplain meaning of a statute are conclusive and that all parts andlanguage of the statute must be considered.10 4

The court also stated:

Although the Marad regulation is not inconsistent with the language ofsection 2, we concede that the language is not "plain and unambiguous",Tennessee Valley Auth. v. Hill, 437 U.S. 153, 184 n. 29 (1978), since section2 does not deal explicitly with the citizenship of parent corporations.105

It was not necessary for § 2 to be more explicit than it was. Itcovers only two situations: (1) the general situation in which the

1°2Supra note 97.103See supra notes 47-52 and accompanying text.

1°4Supra notes 95 and 97 and accompanying text.105Conoco, 970 F.2d at 1219, 1992 AMC at 2833-2834. (footnotes omitted) (emphasis added).

193April 1W9


citizenship of a corporation, any corporation, is determined byownership of its controlling interest, and (2) a special exception tothat general rule in which the citizenship of a corporation which ownsa vessel operating in the coastwise trade is determined by ownershipof 75% interest in that corporation. Section 2(a) and (b) does not haveto address any specific cases (such as a corporate mortgagee, charterer,owner of a vessel operating in the foreign trade or a parent corporationof any of these corporations, including the parent corporation of acorporation owning a vessel operating in the coastwise trade) because itapplies to all corporations not owning a vessel operating in the coastwisetrade. As a general rule applying to all corporations, it is necessarilysilent as to cases to which it applies, specifying instead only the one caseto which the general rule does not apply-corporations which ownvessels operating in the coastwise trade.

Under the general rule, the term "controlling interest" of a corpora-tion, as defined in four subdivisions of § 2(b), applies to any corporation,whether it is the owner of a vessel for purposes of documentation, or theowner or transferee of a documented vessel for purposes of § 9, or theparent corporation of such a corporation, or any corporation in the tierof ownership up to the ultimate individuals.

With respect to the exception to the general rule, a corporationowning a vessel operating in the coastwise trade, § 2(a) and (c) requirethat a 75% interest in that corporation be owned by a citizen of theUnited States. However, if that 75% interest in the vessel owningcorporation is owned by another corporation (or corporations in a tier ofcorporate owners), then the latter corporation(s), is a corporate "citizenof the United States" as referred to in the four subdivisions of § 2(c)(because it is not a corporation owning vessels operating in the coast-wise trade) and needs only to satisfy the general rule that the controllinginterest in it is owned by citizens of the United States.

Section 2 applies to every corporation whose citizenship is inquestion under § 9 and § 27,106 whether it is a corporation that owns

"36MarAd is concerned with transfers of documented vessels under § 9 and the citizenshipof the owners and of the transferee of such vessels. For such purposes only the controllinginterest is required (even if 75% or all of the interest of the owner is held by U.S. citizens).MarAd applies the 75% requirement to the transferee when a vessel documented with acoastwise endorsement is being transferred, although that was not the intent and purpose ofCongress, since the transferee may not necessarily be an owner (and even if it is the owner maynot be able to document the vessel after the transfer with a coastwise endorsement) but may bea charterer or a mortgagee (for which only the general rule of controlling interest would be thetest). See supra notes 53-464 and accompanying texts.

The Coast Guard is concerned with documentation of vessels and, therefore, with thecitizenship of the owner of the vessel being documented. Where a coastwise endorsement is

Vol. 25, No. 2


a vessel or a corporation that owns a controlling or 75% interest in thecorporation owning the vessel. Once the citizenship analysis goesbeyond the corporate (or partnership or association) owner of avessel and other entities (such as other corporations, partnerships orassociations) own an interest in the entity whose citizenship is inquestion or in any intervening entity in the chain of ownership, thenthe citizenship of the intervening entities is determined under thecontrolling interest general rule of § 2(a) and (b).

It is true, as the court observed, that "any corporation which wasmajority owned by U.S. citizens but did not meet the 75% interestrequirement could simply circumvent that requirement by creating awholly-owned subsidiary which held nominal title to the vessel."' 1 7

However, this does not mean that the vessel owning corporation or itsvessel(s) is any less subject to the ultimate control of U.S. citizens (sincethe parent corporation's controlling or majority interest is owned byU.S. citizens) than if 75% of its parent's interest was owned by suchcitizens. Nevertheless, if the Congress feels that this is a circumventionof its objectives and intent, it can simply amend § 2 to require suchincreased percentage of ownership. If this is a loophole in the law, 108 itis for Congress, not MarAd or the courts, to correct.10 9

sought for the vessel, then the 75% interest requirement of § 2(a) and (c) as applied to § 27 and§ 12106 would apply to the owner. The Coast Guard regulation does not apply the 75% interesttest to a parent corporation of the owner but requires that the parent corporation be qualifiedto document the vessel with the endorsement sought in its own right. In the case of acorporation, the requirements are the same but not in the case of a partnership or anassociation. See supra notes 66-67 and 71 and accompanying texts.

1°TConoco, 970 F.2d at 1222, 1992 AMC at 2838. There is no indication as to what the courtmeans by "nominal title" since the documentation laws as to the ownership of the vessel mustbe met before the Coast Guard will document the vessel. However, this was the reason givenby the Coast Guard in justifying its regulation at 46 C.F.R. § 67.03-2(b). Supra note 67.

1°8"Such a loophole would make the citizenship requirements of 46 U.S.C. 12102(a)(3) and12102(a)(4) so easy to evade that they would be virtually meaningless as a practical matter."Final Rule, Coast Guard (88-031), 55 Fed. Reg. 51,244, 51,247 (1990).

109First, it should be noted that Congress was aware of this problem when it enacted theVessel Documentation Act in 1983, and indicated that it would address it in the future. Supranote 68. Second, when Congress has intended the requirements for a corporate owner of avessel to apply to other corporations where the controlling interest of such corporate owner isheld by other corporations, it has specifically so provided. Section 7(a) of Pub. L. No. 100-239(the Commercial Fishing Industry Vessel Re-Flagging Act of 1987) amended 46 U.S.C. § 12102by adding the following as subsection (b)(1) (re-designated as subsection (c) by § 301(a)(2)(B) -(D), Pub. L. No. 101-225 in 1989):

(c)(1) A vessel owned by a corporation is not eligible for a fishery license under section12108 of this title unless the controlling interest (as measured by a majority of votingshares in that corporation) is owned by individuals who are citizens of the United States.However, if the corporation is owned in whole or in part by other United Statescorporations, the controlling interest in those corporations, in the aggregate, must beowned by individuals who are citizens of the United States. (emphasis added).

April 1994


3.2.1.2 Meaning and Effect of Term "Operating"

If the court had correctly interpreted the general rule of § 2 as applyingto corporate parents, then no analysis of the wording of the exception tothe general rule in § 2(a) would have been necessary. However, in orderto determine whether MarAd's regulations were reasonable and permis-sible in the absence of specific language in the statute to the effect that the75% interest requirement applies to the parent corporations of corporateowners of vessels operating in the coastwise trade, the court examined theterms "operating" and "controlling interest." In this effort, the court alsoreached erroneous conclusions.

The court stated that:

Conoco argues that the 75% requirement only applies to the corpora-tion which actually "operates" the vessels (in this case Conoco), whilethe 50% "controlling interest" requirement applies to the parentcorporation (Du Pont) and other corporate stockholders." 0

The court focused its attention on § 2 without examining § 27,which contains the requirement that a vessel transporting merchan-dise in the coastwise trade be owned by U.S. citizens as defined by§ 2. Section 2 was amended to cover the § 27 situation by the additionof the exception to § 2(a) and the definition in § 2(c). However, theexception has meaning only if it applies to the owner of the vesselwhich is operated in the coastwise trade, not to the operator (unlessthe operator is also the owner).'

After focusing on the term "operating" in the § 2(a) exception, thecourt turned to § 2(c), the 75% interest definition, and particularlysubdivisions (c) and (d) of that subsection. The court contended thatthese provision supported its "broad" reading of "operating" in § 2(a) as they indicated Congress' intent that the requirements of § 2extend beyond the subsidiary which "legally owns and operates" thevessels. 1 2 In so doing, the court erred by not looking first to § 2(a)before considering § 2(c). The purpose of the 1920 amendment addingthe 75% interest requirement to § 2(a) and the definition of 75%interest in subsection 2 (c) was to provide a definition for the term"citizens of the United States" used in § 27 of the 1920 Act, whichsection required that vessels transporting merchandise in the coast-wise trade be "owned by persons who are citizens of the United

I°Conoco, 970 F.2d at 1217, 1992 AMC at 2830. Even if Conoco did so argue, it is clear that thecourt was speaking only of the case where the operator is the owner (as in the case of Conoco).

"'See supra notes 47-59 and accompanying texts." 2Conoco, 970 F.2d at 1218, 1992 AMC at 2831.

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States."11 3 This amendment provided a specific and exclusive defini-tion of "citizens of the United States" for corporations owningvessels operating in the coastwise trade. The 75% U.S. ownershiprequirement applies only to the corporation that owns the vesselsoperating in the coastwise trade and, therefore, § 2(c)'s application islimited to that situation as well. If the citizenship of the corporateoperator of such vessels (not also the owner of the vessels) is inquestion, then its citizenship is determined under the general rule thatonly a controlling interest in the corporation (as defined in § 2 (a) and(b)) must be held by U.S. citizens. There can be no ambiguity oruncertainty in this interpretation of § 2.

The 1920 Act not only contained § 27, but also amended § 2(a) toadd the exception to that section's general rule. If Congress hadintended the 75% requirement to apply to the operator (as well as theowner) of a vessel operating in the coastwise trade, it could haveworded § 27 to read "must be owned and/or operated" and wordedthe exception in § 2(a) to read "corporation owning and/or operat-ing," or similar language. The fact that Congress did not do so is clearevidence that the 75% interest requirement applies only to theowner. 14 Section 2 is unclear or ambiguous only to the minds of thosewanting to extend its application to operators as well as owners ofvessels operating in the coastwise trade.

3.2.1.3 Parent's "Controlling Interest" of the Vessel OwningCorporation, Not "Control" of the Vessel, Is the Issue

In its analysis of the term "operating," the court found that thecorporate parent has "ultimate control" over the subsidiary and itsactions and concluded that "in the context of section 2, we analyzethe word 'operating' in terms of corporate stock control rather thanactual control over the vessel."' 11

5

Although Conoco argued that it and Du Pont were two separateentities, the court said that this did not "negate the fact that Du Pontowns all of Conoco's stock and thus, necessarily owns Conoco'svessels." 6 However, it should be noted that Public Law No. 100-710,

" 3 See supra notes 47-52 and accompanying text (emphasis added)." 4Recourse here by the court to Alaska Excursion I and its interpretation by MarAd would

have been most helpful. See supra notes 53-57." 5Conoco, 970 F.2d at 1217, 1992 AMC at 2830."61d. (citing H. Rep. No. 100-918, 100th Cong., 2d Sess., 24, reprinted in U.S.C.C.A.N.

6104, 6117, for the proposition that "a transfer of control of a subsidiary also transfers allvessels owned or operated by that subsidiary.") (emphasis added).

197April 1994


which was the subject of House Report No. 100-918 relied upon by thecourt in this finding, added the words "control of" a vessel to § 9(c) in1988.117 As an example of the effect of the addition of "control of"vessels to § 9, the House Report stated that "the transfer of a controllinginterest in the stock of a parent corporation constitutes a transfer ofcontrol of its subsidiary and thereby control over all vessels owned oroperated by that subsidiary."' 1 8 Control of or over a vessel is differentfrom ownership of that vessel, particularly under § 27, where owner-ship, not control, is the requirement.

In United States v. Niarchos, the court held that it was basic lawthat a stockholder of a corporation does not own an interest in anyparticular property, such as a vessel, owned by that corporation, andthat a transfer of a share of stock by a stockholder of a vessel owningcorporation is not a transfer of "an interest in" a vessel owned bythat corporation and does not require MarAd approval under § 9 (asthen worded) as a transfer of "an interest in" a vessel." 9 Asrecognized in that case, the court's interpretation is not the law for§ 9 purposes and cannot be read into § 2. In fact, House Report No.100-918 provides that "[s]tock transfers were construed [by the courtin Niarchos] to be transfers of an interest in the shipowner and not thevessel. " 120

The House Committee indicated 21 that the addition of "controlof" vessels was to reconcile the disparate judicial constructions of § 9in the Niarchos case and that in United States v. Meacham.122 Therewas no reference to § 2 or the term "controlling interest" in theHouse Report. The amendment to § 9(c) corrected the position ofMarAd, that had been overruled in Niarchos but which MarAdcontinued to apply, that a transfer of a share of stock in a corporationowning a vessel was a transfer of "an interest in" that vessel. TheCommittee acknowledged that "Section 103(b) [of Public Law No.100-710] also makes a substantive change to law by amending section9 of the Shipping Act, 1916 (46 U.S.C. app. 808) to ensure itsapplicability to transfers of control of vessels as well as the transfersof an interest in vessels ... ,"123 The court recognized that the

117Supra notes 31 and 32.

" 8H. Rep. No. 100-918, 100th Cong., 2d Sess., reprinted in 1993 Pamphlet, Title 46 Shipping

(West), 634, 649."9125 F. Supp. 214, 228 (D.D.C. 1954).12°Supra note 118 (emphasis added).12l1d.

122207 F.2d 535 (4th Cir. 1954).123

Supra note 118 (emphasis added).

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amendment was intended "to prevent corporations from circumvent-ing section 9 [not § 2] by transferring de facto control of a vesselwithout transferring an interest in the vessel." 124

The House Report further stated that the objective of the amend-ment of § 9(c) was "to ensure that decisions concerning the use andoperation of a documented vessel remain in the hands of citizens ofthe United States with a view toward making those vessels availableto the United States for national defense."' 125 This amendment spokesolely to "control of a vessel." There is no doubt that so long as the"controlling interest" of a corporation owning a documented vesselis owned by U.S. citizens, those vessels remain available to theUnited States for national defense. Amended § 9 ensures that objec-tive with regard to any vessel documented under U.S. laws andowned by citizens of the United States. Section 2 ensures the sameobjective by requiring for purposes of § 27 that a 75% interest in acorporation owning a vessel operating in the coastwise trade beowned by U.S. citizens, and that the controlling interest in any parentor other corporation in the tier of ownership of the vessel owningcorporation, or in any corporation for any purpose other than § 27, isowned by U.S. citizens. To mix §§ 2 and 9(c) of the 1916 Act withdiffering objectives, although with the same or similar purpose, is notrequired in the interpretation of either section.

Except in the case of a corporation owning a vessel operating in thecoastwise trade, the general rule as contained in § 2 as originallyenacted in 1916 and as amended in 1918, which requires only a"controlling interest" in a corporation, should apply. Thus, thecitizenship of Conoco, as to the vessels owned by it and documentedwith coastwise endorsements, must meet the exception to the generalrule, the 75% interest requirement. However, as to its parent corpo-ration, Energy, and to the latter's parent, Du Pont, neither of whichfor purposes of determining Conoco's U.S. citizenship is an owner ofvessels operating in the coastwise trade, 126 the general rule, thecontrolling interest requirement, should apply to determine their U.S.citizenship.

12 4Conoco, 970 F.2d at 1222, 1992 AMC at 2838.125SupM note 118.126Du Pont may have vessels owned by it documented under the Bowaters Amendment but

not with a coastwise endorsement under § 27 and § 12106. It could also have the documents ofits vessels issued with registry endorsements since it probably meets all the requirements for

such an endorsement which does not require that any of the stock of the corporate owner of thevessel be held by U.S. citizens.

199Apfil 19N4


It is clear that: (1) 100% of the stock, the voting power and theinterest of Conoco is held by Energy, (2) 100% of the stock, the votingpower and the interest of Energy is held by Du Pont, and (3) in excessof a majority (a controlling interest), but less than 75%, of the stock,the voting power and the interest of Du Pont is held by citizens of theUnited States. Energy and Du Pont must be "citizens of the UnitedStates" (under the controlling, not the 75%, interest requirement) inorder for a 75% interest in Conoco (and a controlling interest inEnergy and Du Pont) to be considered held by "citizens of the UnitedStates" and, thus, for Conoco to be a citizen of the United Statesitself for purposes of § 27 and § 12106.

Because Du Pont holds a certificate of compliance, it is a Bowaterscorporation and deemed a "citizen of the United States" for purposesof documenting its own vessels for operation in the coastwise tradeunder the Bowaters Amendment and § 27. However, it must qualifyseparately as a citizen of the United States for other purposes. As theultimate corporate parent of Conoco, for Du Pont to qualify as a U.S.citizen for the purpose of Conoco's qualification to document itsvessels with coastwise endorsements under § 27 (not the BowatersAmendment), Du Pont must satisfy only the general rule that acontrolling interest in Du Pont (as in Energy) is held by citizens of theUnited States. For Conoco (or Du Pont) to qualify as a Bowaterscorporation and have its vessels documented with a limited coastwiseendorsement, there is no requirement as to the citizenship of itsshareholders (or of its parent corporation). 12 7

The court's reference to subdivisions (c) and (d) of § 2(c)128 doesnot alter this requirement. The corporation referred to in thesesubdivisions (as well as in subdivision (b) of § 2(c)) ("such corpora-tion" or "the corporation") is the corporation to which the 75%interest requirement as defined in § 2(c) applies (i.e., the corporationreferred to in the exception added to § 2(a) which owns vesselsoperating in the coastwise trade). Energy holds 100% interest inConoco, the actual vessel owner. Du Pont holds 100% interest inEnergy. Although slightly more than 25% interest in Du Pont is heldby noncitizens, there is no way that the holders of this minorityinterest can exercise any voting power or control over any interest inConoco. So long as a majority of the stock, the voting power and the

127Supra note 76. A "parent" of a Bowaters Corporation is defined as a corporation whichcontrols, directly or indirectly, at least 50 per centum (not 75 per centum) of the voting stockof the Bowaters corporation. Section 27A second unnumbered paragraph.

128Conoco, 970 F.2d at 1218, 1992 AMC at 2831.

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