Can a time charterer be held accountable to third parties for damage done by the ship, the root causes of which were connected to the owner's ISM management failing? The Yochow [2022] sheds light on this issue from a US perspective.
The Yochow collided with a barge and damaged a dock in the Houston channel when the helmsman put the wheel in the direction opposite to what the command was. The owners of the dock and the barge were claiming against the owner and time charterer of the vessel. Specifically, against the time charterer, they contended that time charterer failed to ensure that the ship owner had appropriate safety management procedures in place or failed to discover inadequacies in the owner’s SMS. China Navigation, who were the time charterers were looking for dismissal of all claims against them.
It came down to two questions:
Did the time charterer exercise sufficient operational control over the vessel here; and
Does a time charterer have a duty to vet a vessel owner prior to executing a charter party.
The court answered the first question in negative, stating that owners did not pass on the vessel’s management, navigation, and safety to the time charterer. The fact that (a) Lloyd's Register of Ships named China Navigation as the ‘Manager’ of the vessel; or that China Navigation had (b) renamed the vessel; (c) painted her in its house colours; (d) painted its corporate logo on her funnel; and (e) had directed the vessel to install their in house tracking/reporting software were irrelevant. These events had nothing to do with exercise of control over the vessel by the charterer.
As for the second question, the court considered a time charterer’s traditional spheres of activities, which include choosing the vessel's cargo, route, and general mission, as well as the specific time in which the vessel will perform its assignment. None of these require or oblige them to vet the owners’ safety procedures or even the finances, unless agreed between them. As a result, a time charterer cannot become the de facto owner of a ship.
Question - What if a time charterer examines the ship owner's procedures and finds that SMS was improperly implemented, but takes no action. Would the result be different than above in these circumstances?
Link to the judgement by United States Court of Appeals, Fifth Circuit: https://www.leagle.com/decision/infco20220815062
Link tot he judgement by the lower court (also in favour of the time charterer): https://casetext.com/case/grand-famous-shipping-ltd-v-the-port-of-hous-auth-1
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