SHIPPING & COMMODITIES: An Introduction

With continuing economic and geopolitical uncertainty creating both challenges and opportunities, 2024 has been an eventful year for businesses in shipping and commodities. Likewise, a slew of new cases and legislative reforms have generated fundamental changes to both principle and practice in certain areas.

The most dramatic development within the broader industry was undoubtedly the disruption caused by the Israel-Palestine conflict. As a result of several successful attacks on merchant vessels by Houthi rebel groups, shipping activity in the Red Sea was significantly reduced. This resulted in a substantial and sustained increase in freight rates over the course of 2024. This more than counteracted the arrival of additional tonnage, which had been ordered across the industry during the COVID-19 pandemic. It is unclear, however, whether rates will hold up in the coming year, given the resurgence of protectionist economic policies amongst major economies such as the United States, which may result in a downturn in international trade.

It has also been a milestone year in the transition towards more sustainable shipping, with the EU’s Emission’s Trading Scheme applying to the maritime transport sector from January 1^st onwards. This was accompanied by a further increase in orders for new alternative-fuelled ships, which according to most sources were up by around 50% year-on-year. Although undoubtedly welcome from an environmental perspective, it remains to be seen what financial impact, if any, these developments will have.

The key commodities case of 2024 was Sharp Corp Ltd v Viterra BV [2024] UKSC 14. In which the Supreme Court held that the principle of mitigation was as fundamental as the compensatory principle in the law of damages. This meant that, under the GAFTA default clause, damages were to be assessed by reference to “the market in which it would be reasonable for the seller to sell the contract goods” at the date of default.

As for shipping law, the most important decision of last year was the Supreme Court’s in FIMBank Plc v KCH Shipping Co. Ltd (The “Giant Ace”) [2024] UKSC 38, which concerned the long-debated question of whether the one-year time bar in Article III Rule 6 under the Hague/Hague-Visby Rules (the “Rules”) applies to misdelivery and other breaches occurring after discharge of the goods. FIMBank had made a belated claim for alleged misdelivery of cargo by the carrier, KCH, but argued that its claim was not caught by the time bar because delivery took place after discharge and so fell outside the “period of responsibility” covered by the Rules.

The Supreme Court held that under both the Hague and Hague-Visby Rules, Article III Rule 6 operated as a time bar in respect of all breaches of duty on the part of the carrier, including misdelivery of the goods, up to and including delivery of the goods. In short, the Court’s reasoning was:

• that the wide language of Article III Rule 6 showed that it was concerned with the period up to “delivery”, as distinct from “discharge”; and
• the purpose of Article III Rule 6 was finality and to avoid “factual niceties” around when and how discharge was completed.

Just because a carrier’s rights and obligations related to its “period of responsibility” under the Rules, this did not mean that all of the Rules were concerned only with that “period”.

More recently, the decision of Henshaw J in Bunge S.A v Pan Ocean Co. Ltd. (The “Sagar Ratan”) [2025] EWHC 193 (Admiralty), handed down in February 2025, was the first time the English court has considered the widely used BIMCO Infectious or Contagious Diseases Clause for Time Charter Parties 2015 (the “BIMCO Clause”) and, in particular, the meaning of the phrase “Affected Area”. Henshaw J held that an “Affected Area” would include a port or place where:

• the risk of quarantine or other restrictions is one of general application arising from a qualifying disease, such as a blanket requirement to quarantine all vessels for 14 days regardless of test results; or
• there is a risk of quarantine or other restrictions because of the relevant vessel having previously visited a port affected by the disease.

During 2024, the courts also saw a number of important cases on the scope of the 1976 Limitation Convention, which will provide much-welcomed clarity for practitioners. In particular, the courts have had to grapple with the scope of the rights of charterers seeking to limit under the Convention.

The EWCA held in MSC Mediterranean Shipping Company S.A. v Stolt Tank Containers B.V. and Others (MSC Flaminia) [2023] EWCA Civ 1007 that the 1976 Convention does not permit a charterer, whose right to limit arises because it falls within the definition of “shipowner”, to limit its liability in relation to claims by the actual owner in respect of losses suffered by (and only by) the actual owner. The appellant time charterer had sought an order that it was entitled to limit its liability to the owner of a ship, the respondent, which arose out of an explosion on the MSC Flaminia that took place in July 2012 as a result of the loading of a dangerous cargo of divinylbenzene (a chemical used in the rubber and plastics industry). The owner sought compensation for various costs incurred following the explosion, relating to decontamination and discharge of cargo, removing waste and firefighting water from the ship’s hold and payments made to national authorities. One of the key reasons for the court’s decision to deny that the charterer had a right to limit, was that otherwise the owner’s claim would have to be paid from the fund thereby diminishing the amount available for third-party claimants, for whose benefit the fund is primarily constituted.

On 5–6 February, the Supreme Court heard an appeal from the EWCA’s decision. Expect to see a judgment handed down this year on this important issue.

In another limitation case, which arose out of the sinking of the X-Press Pearl off Sri Lanka in 2021, the High Court was asked to consider the scope of the phrase “charterer … of a seagoing ship” in the definition of “shipowner” under Article 1(2) of the 1976 Convention (Sea Consortium Ltd and Others v Bengal Tiger Line Ltd Pte and Others [2024] EWHC 3174 (Admiralty)). The case confirmed the decision of Teare J in The MSC Napoli [2008] EWHC 3002 (Admlty) that slot charterers are included within the Article 1(2) definition, so that there is no requirement that the “charterer” in question has the right to use or direct the use of the entire cargo-carrying capacity of the ship. Mr Justice Andrew Baker also reasoned that it should normally be sufficient, for a party to be considered an Article 1(2) charterer, that its relevant contract obliges an owner or disponent owner to make part of the carrying capacity of a ship available to that party for the carriage of goods which that party will have contracted, or will be obliged to contract, to undertake as carrier. This is the case even in circumstances where there is no requirement for the charterer to pay for space that is not in fact used.

At a time of significant geopolitical risk, English law and the courts continue to demonstrate that they can provide answers to the questions posed by a volatile trading environment.