The new express regulation of the nautical lease contract or charter requires considering the imperative aspects thereof, as a general rule, beneficial for the charterer, normally a consumer.
Last September, Act 14/2014, dated 24th July, of Maritime Navigation came into force in Spain. This Act, which repeals the previous 1885 regulation on maritime trade, inserted into the Commercial Code, constitutes an important turning point in maritime law and has an important influence in regulating nautical recreation. Unreservedly, nautical leisure and sport, as well as the legal relationships around vessels or recreational ships, are from now onwards regulated by this maritime law rule. In this article, the first of a series of ones in which we will deepen about the recent regulation, we will cover about the brand new regulation on nautical charter or, paraphrasing the Maritime Navigation Act, the nautical lease contract.
The nautical lease contract or charter contract
The Maritime Navigation Act regulates in its articles 307 till 313, Chapter V, Title IV, the Nautical Lease Contract (charter contract), defined as the one by which the lessor/ owner conveys or makes available to the charterer a ship or a recreational vessel against the payment of a price, for a determined period of time and with a purely sportive or recreational purpose. The first conclusion which we can draw is that the law regulates the relationship with the final lessee and not between the owner and the manager, if need be. The relationship with the charter manager appears regulated in the Maritime Navigation Act by the contract of nautical management.
The law distinguishes between a manned and an unmanned nautical lease. Regarding an unmanned nautical lease, it is established that it would be governed by the same Chapter V we previously discussed, the applicable laws to the leasing of ships, established in Chapter I of Title IV and by agreements freely agreed between the contracting parties. A manned nautical lease is ordered to be governed by Chapter V, by what is established in article 210 of the Maritime Navigation Act and by agreements freely agreed by the parties.
It is important to bear in mind that, being established by the Maritime Navigation Act itself, articles 307 and 313 (Chapter V of Title IV) are mandatory rules. That is to say, the parties cannot revoke what is established in them. Focusing on this, the rules which cannot be revoked by agreements between the parties are the following:
1) In case of delay in the delivery of the yacht, the owner must indemnify the charterer with the agreed amount or, failing that, with an amount proportional to the delay caused. This scenario, although compulsory, might be deactivated if in the contract a lower indemnity, compared to the one which corresponds proportionally for the delay, is agreed.
2) If the delay amounts to over 48 hours, in addition to the indemnity, the charterer may terminate the contract or extend it for the time delayed. In case of termination of the contract, everything paid would need to be refunded. Even worse would be the possibility of an extension since this would not be possible to perform if the yacht has been contracted subsequently for another charter without causing damage to the lessor and/or subsequent lessee. I understand that this eventuality should be foreseen in the contract, rejecting an extension in the event of a subsequent contract.
3) In a manned charter, the captain and crew must follow the charterer´s instructions, provided they do not adversely affect the yacht´s security. Undoubtedly, it is a clearly logical clause.
4) In a manned charter, the charterer must inform the owner of any damage which could affect the security or seaworthiness of the yacht. This is another entirely logical and responsible obligation.
Finally, it is prescribed that the vessel must be covered by a compulsory liability insurance, which we understand is particular of vessels already regulated in the Royal Decree 697/1999.
The vessels lease contract
The regulation of the unmanned nautical lease, the typical one in vessels up to 15 metres in length, the Maritime Navigation Act orders that, in addition to what is provided in Chapter V, Title IV, the rules of the vessel lease contract and the freely agreed pacts between the parties should be applied. That is, those aspects which are not expressly regulated in the contract subscribed by the parties are subject to what is said by the Maritime Navigation Act.
The vessel lease contract, as we have said, is regulated in Chapter I of Title IV, articles 188 to 203, from which we should point out:
1) The contract must be made in writing. The inexistence of a written contract would have as a consequence that the relationships between the parties would be governed by the Maritime Navigation Act, and it could be detrimental to either party when showing that the assignment of the use of the ship was by virtue of a charter.
2) The yacht must be delivered and returned in the agreed place.
3) The yacht must be delivered in seaworthy conditions, being the owner responsible of the reparations which derive from the yacht defects and of indemnifying the charterer for the damages caused. This clause is imperative for the unmanned nautical lease contract.
4) The owner is obliged to maintain the yacht in seaworthiness conditions during the lease, except when the impediment is due to the fault of the charterer. This rule of law is also of necessary law, it is to say, no agreement which exonerates the lessor from this obligation is allowed.
5) The yacht must be restored by the charterer in the agreed place or, in the absence of agreement, where it was delivered to him in the same state in which it was delivered, except normal wear, being the lessor entitled to compensation in case of delay. This is a very important clause because it authorizes the lessor to claim to the lessee if in the given case, due to an accident, the vessel cannot be delivered depriving the lessor from leasing the vessel to other clients.
6) In the absence of agreement to the contrary, in case of demurrage, the contract will be considered extended until the delivery. Even though the extension gives the right to the lessor to charge, if it is not forbidden or penalized in the contract, the extension could cause a serious damage to the lessor if, due to it, he is prevented from making a subsequent charter which he had already contracted.
7) The charterer is obliged to hold harmless the owner from any charge which could arise from the use of the yacht. This clause would lose its effectiveness if the one who appears as the lessor does not act as the shipowner in case of arrest due to a maritime credit which affects the yacht, as it could be a port tariff.
8) If in the given case the yacht cannot be used during a period of 48 hours, the charterer will have the right to a reduction in the price or to terminate the contract, without prejudice to the compensation which may apply. This obligation is also imperative, so there can be no agreement to the contrary and it may be extremely damaging for the lessor which, due to lack of diligence, allows the lessee, subject to this clause, to end up terminating the contract abandoning the ship in a distant port.
As we have said, although most of the rules concerning the ship lease contract are mostly non-mandatory, it is to say, allows the parties to reach agreements which cancel clauses established by law, when it is referred to nautical lease, many of the legal provisions become mandatory. Before them, which undoubtedly aims to protect the position of the lessee consumer, the only way is to act in the most diligent way, as we have said, any clause which contradicts the law would be void.
About article 210 of the Maritime Navigation Act
The regulation of the manned nautical lease contract, the Maritime Navigation Act orders that, in addition to the own and imperative laws of the nautical lease contract already analyzed, article 210 of the Maritime Navigation Act will apply and also the agreements reached by the parties. Article 210 is part of the chapter devoted to charterparties, and orders that to the contracts for the lease of ships with different purposes to those of transporting goods (nautical lease case), the regulatory provisions of the charterparty with regard to the provision, use of the ship and early termination of the contract may be applicable.
Amongst the most important we must highlight:
1) If the contract is referred to a specific yacht, it cannot be substituted by another, unless otherwise agreed.
2) The charterer may terminate the contract in case the yacht is not delivered in the date and port agreed, having a right to be indemnified.
3) It is an obligation of the lessor to deliver the ship in seaworthy conditions and to act with the necessary diligence in order for this to maintain during the charter duration.
4) The contract may be terminated due to a delay with no fault of the parties when the parties are not required to wait until the problem which causes the delay is fixed. We could be facing a delay caused by a storm that could make the lessee lose the purpose of the lease. For example, go with the yacht to a particular event.
5) In the case of a sale, the buyer would not be obliged by those leases contracted by the seller which have not commenced by the time of the sale.
Even though this case is concerned with non-mandatory rules, it is to say, agreement to the contrary is admitted, they would be directly applicable if nothing different is expected in the contract subscribed by the parties.
Considerations concerning the MYBA charter contract
Once having analyzed the Maritime Navigation Act prescriptions regarding the nautical lease contract and considering that in many cases there is an international component in providing this service, it is important to know in which cases the Maritime Navigation Act will be the rule governing the contract. As we have seen, the Spanish maritime law has numerous mandatory provisions which clearly protects the charterer and which would override contra legem the contractual clauses.
The Spanish Civil Code establishes that it will be applied to the contractual obligations the law to which the parties have expressly submitted, provided that it has some connection with the business in question; and in the absence of agreement, the national law common to the parties; in the absence thereof, the one of the common habitual residence, and, ultimately, the law of the place where the contract was signed. With it, we can conclude that with the lack of foresight against, the Maritime Navigation Act will always be applied whenever nothing else is agreed, being the charterer and owner Spanish or resident in Spain and being Spain the place where the contract is celebrated. In this last case when non Spanish resident parties didn´t design a foreign law.
However, in many occasions the charter contract or nautical lease is executed by the offer from the charter company and by the acceptance of the charterer, who may find themselves in a different country from the one of the service provider. For example, the lessor in Baleares and the lessee in Germany. In this case, the applicable law would be the one where the contract has been performed. Given this circumstance, the regulation establishes that the law of the domicile of the service provider would apply, which would be the Spanish. Now, when the person contracting is a consumer, which in the charter contract is the most common, the law which would apply would be the German. It is to say, unless otherwise agreed, when contracting through e-mail (or by other means which allows distance contracting) with a consumer, the law of his domicile will apply, so the contract should be to the provisions of that law (the German). This statement cannot be done without referring to the Regulation (EC) No. 593/2008 of the European Parliament and of the Council, of 17th June 2008, on the law applicable to contractual obligations (Rome I). This regulation, allows the parties to the contract to chose the applicable law, for example, they could chose the Maritime Navigation Act, the Spanish law, or other, expressed in the contract. This freedom of choice has its limitations when the one who contracts the service is a consumer, being able to chose, for example, the Spanish legislation when it allows a greater or equal protection which would apply in the absence of agreement, it is to say, the German for being the residence of the consumer who contracts the service.
At this point, the application of the MYBA charter contract deserves some consideration, commonly used in the lease of large yachts, which refers the regulation of the contract to English law. Even though being the English law accepted by the parties, there are several cases in which we understand would apply those imperative precepts of the Maritime Navigation Act which we have discussed in the preceding paragraphs of this article. When the service provider offers the yacht, even foreign, from a Spanish base and to a consumer resident in Spain, we understand that it would be applied, against agreement, the Maritime Navigation Act in what is imperative. The same would happen, even with the reference to the English law, when the consumer lessee resident in Spain has a greater protection under the Maritime Navigation Act against that which the English Law grants. Finally, the Regulation orders that when all other relevant elements of the situation are located at the time of the election in a country other than the one whose law is chosen, the election of the parties shall not prejudice the application of the provisions of the law of that other country which cannot be excluded by agreement. That is, if the service is provided in Spain between a Maltese shipowner and a French charterer (a consumer), although the contract would be subject to English law, we understand that the mandatory provisions of the Maritime Navigation Act governing the nautical lease contract would apply due to the fact that there is no connection with that law.
Having said this, it is mandatory to refer to the clause of submission to English jurisdiction and arbitration, also specific of the MYBA charter contract. If, pursuant to the foregoing considerations, the Maritime Navigation Act applies as guiding standard of the contract, in order for the given clause to be valid, it is required that it is negotiated individually and separately, without evidencing on its own the conditioned printed in the contract the compliance with those requirements. That is to say, in certain cases, even having concluded the MYBA charter contract, this would be nuanced very significantly by a mandatory regulation of the Maritime Navigation Act on the nautical lease contract and the possible litigation could be sustained in the Spanish courts, not being valid the clause of submission to London arbitration.
Yamandú Rodríguez Caorsi
Blas de Lezo Abogados
Calle 60 Zona Franca, 25, Edificio ZETA
08040 – Barcelona
Tel: 0034 934192489
Fax: 0034 934193611
Movil: 0034 615320452