As I write this the Country’s news media are obsessed with the environmental fallout from the grounding of the Rena. While the reporting appears to mainly be focussed on the Government’s management of the response to the immediate environmental threat, there is increasing public concern as to whether the owner of the Rena will be able to be held responsible for the environmental damage and clean-up costs resulting from the grounding. The public needs reassurance as, while the “owner”, Costamare Inc, is a well-established (and hugely profitable) Greek company, it appears that Costamare “owns” the Rena through a subsidiary company, the Rena itself is flagged in Liberia, the Rena was crewed by a master and crew from the Philippines, and the Rena has recently been cited for various safety violations. Such factors are admittedly the norm rather than the exception in the international shipping industry, but that does not make them any more palatable to the public. It is undeniable that “flags of convenience” such as that of Liberia are used for the express purpose of minimising taxes and avoiding the operation of various international maritime treaties which Liberia (and similar states) have not ratified. The choice of a Philippine master and crew is not in itself sinister - the Philippines is one if the world’s great producers of seafarers. Nonetheless, it is undeniably the case that Philippine crews have generally been treated and paid worse than crews from more developed countries. Furthermore, the crew can, in practice, often act as a form of legal insulation whereby ship owners can attempt to shift responsibility and liability (whether civil or criminal) onto the master and crew while themselves avoiding liability. Nonetheless in this particular case there is no reason to doubt that the Government will not only be able to make a reasonable recovery of the cleanup costs from Costamare Inc or its subsidiary, and (if it chooses) obtain a successful prosecution. The grounding occurred within New Zealand’s territorial waters, meaning that the Rena’s master and owner are subject not only to substantial penalties under the Maritime Transport and Resource Management Acts, but also have a legal liability to compensate the Government in relation to clean-up costs. While to date only the master of the Rena has been charged under the Maritime Transport Act, further charges are likely against both the master and owner of the Rena, and the issue of compensation for cleanup costs will in all likelihood be resolved behind closed doors. While flags of convenience, the use of holding companies and the like may be useful and invoked, to attempt to avoid liability where the grounding occurs in international waters or where, frankly, the shipper does not care about the damage to its reputation, such stratagems are legally and practically of limited use in circumstances such as these. In practical terms Costamare Inc is simply too well established, and the grounding relatively minor, for it to risk damaging its ability to continue trading in New Zealand by attempting to avoid responsibility for the consequences of the grounding. What is likely to be highly contested, and likely to occupy the Courts for some time (although not necessarily New Zealand Courts) is the issue of who has liability to the owners of the cargo on board the Rena, and how much those cargo owners are entitled to receive for their losses. It appears that more than 70 containers have already been lost overseas. No doubt some of the containers will already have suffered water damage, others will have lost refrigeration, and there may be considerable losses resulting simply from the delay that will be caused in the intact cargo reaching its final destination. In particular under the international “Hague Visby Rules” (incorporated into New Zealand law by the Maritime Transport Act 1994) while ship owners are liable for damage resulting from events within their direct power or control (or breach of certain express obligations placed on the ship owner), the owner is not responsible for damage arising from an “act, neglect or default of the master, mariner, pilot… in the navigation or management of the ship”. It was the master who navigated the Rena onto the reef. One could reasonably expect a vehement denial from the Rena’s owner that it had any responsibility for the master’s actions. Whether such an argument would succeed is wholly unclear, given the allegations that have surfaced that the Rena was equipped with outdated and/or inadequate maritime charts. The Hague Visby Rules also codify a limitation on a the maximum liability of the ship owner, which will be available to the ship-owner unless the ship owner has been guilty of intentional or reckless conduct which has led to the loss. Again, whether this limitation of liability is available often comes down to an analysis of whether a grounding was caused solely by the actions of the ship’s master and crew, or whether the ship owner was also somehow complicit in the circumstances surrounding the grounding. So, do not be surprised if that, long after the environmental consequences of the grounding have been addressed and paid for, this matter is still being litigated between the cargo owners and the owners of the Rena, or if the only person found to have civil liability to the cargo-owners is ultimately the master of the Rena.
By Chris Patterson