WELL BOAT CHARTERPARTIES – liability for cargo damage

As the Norwegian fish farming industry continues to grow, so does the demand for well boats. These sophisticated vessels transport fish, but also undertake complex tasks such as delousing and sorting fish. Damage to or loss of the fish handled by these vessels can result in substantial losses. Therefore, owners and charterers of well boats are advised to regulate the risks associated with such services in their charterparties.

The fish farmers’ demand for well boats is mainly met by time chartering. The shipowners’ liability towards the fish farmers under the time charterparties for loss or damage during transportation of live animals (including fish) is governed by section 277 of the Norwegian Maritime Code (“NMC”). The provision is non-mandatory and the owners and charterers often agree on deviating principles in the time charterparties.

Pursuant to NMC section 277 the owners are not liable for loss or ­damage to live fish if the loss or damage is caused by the “particular risks” inherent to carriage of such cargo. Furthermore, if the owners can show that loss or damage may have been caused by such ­particular risks and also that they have followed the particular instructions given, the burden of proof shifts onto the charterers who must then prove negligence on part of the owners in order to substantiate a claim against the owners.

The term “particular risks” leaves room for interpretation as the relevant legal sources offer little guidance to clarify the meaning of the term. Thus, it is likely that disputes will arise between owners and charterers regarding the scope of this term in cases where fish have been damaged or lost. The likelihood of such disputes arising is relatively high taking into account the large number of well boat charterparties that have been entered into the past couple of years.

Another potential issue under NMC 277 is that the provision only applies to “transportation by sea”. This clearly comprises traditional transportation of for example live smolt and fish from a fish farm to a port facility. However, the increasingly sophisticated tasks carried out on board the well boats, such as delousing, treatment and sorting of fish, are not necessarily included by the term. Furthermore, it appears difficult for the owners or charterers to insure the full potential loss that may result from such tasks.

The liability regime under the NMC falls short when it comes to regulating important aspects concerning live fish handled by well boats. Therefore, the parties should include specific provisions in the time charterparties for allocation of risks and liability, in particular in respect of tasks such as sorting, splitting and counting, as well as medical and parasite treatment (either with chemical products, water flushing or other methods). Such provisions should also specify whether such liability should be subject to a limitation amount. Despite the many difficulties which may be encountered when negotiating and drafting well boat charterparties, good solutions are often possible given an appropriate approach to the issues.

As is true in all contracts, increased clarity in the liability provisions of well boat charterparties reduces the risk of costly and time consuming disputes.