In an ideal world, an amicable out-of-court settlement offers the best solution to all kinds of commercial disputes. However, in reality, in an international commercial world businessmen, such as shipowners and charterers, inevitably find themselves and their vessels involved in civil litigation, often in jurisdictions where they are completely unfamiliar with the legal system or regulations.

Today, Cyprus has one of the most extensive shipping fleets. Consequently, it quite often transpires that Cyprus Law is the proper law of the contract or tort and courts in Cyprus have jurisdiction to try cases in which shipowners are being sued for damages and their vessels arrested by a Court Marshal while being within the territorial waters of Cyprus.

Cyprus Admiralty Law and procedure is very similar to that of English Admiralty Law and, in some ways, is proven to be favourable for shipowners since they may minimise their liability under the old Merchant Shipping Act (MSA)1894 which, according to one school of thought, is still applicable in Cyprus while others consider the 1958 Merchant Shipping Act to be applicable. Besides that, the Hague Rules are still applicable in Cyprus, under which the carrier may limit his liability to 100 gold value per unit or package.

The main purpose of this article is not to provide a detailed, in-depth, technical analysis of the issues pertaining to the liability of shipowners, but rather to familiarise readers with Cyprus Admiralty Law and the Court's jurisdiction in Cyprus on issues of this nature, as well as to update them on recent developments.

According to S.29 (1)(a) of the Cyprus Courts of Justice Law 14/60, the Supreme Court of Cyprus shall apply the law which was previously applied by the High Court of Justice in England on the day preceding Independence Day, that is 15 August 1960, in the exercise of its Admiralty jurisdiction as may be modified by any law of the Republic.

In addition, all decided English cases relating to Admiralty Law even thereafter, although not binding on Cyprus courts, have a significant bearing on them. Furthermore, section 29 (2)(e), which does not only refer to Admiralty Law, provides that every court in Cyprus shall apply the Acts of Parliament of the United Kingdom or Great Britain and Northern Ireland which were applicable to Cyprus immediately preceding Independence Day.

In Cyprus, the Supreme Court of Cyprus has jurisdiction to try Admiralty cases by virtue of S.19 (a) of the Courts of Justice Law 14/60 as amended. In its Admiralty jurisdiction, the Supreme Court acts as a Court of First Instance. The judges of the Supreme Court are of a very high calibre and are all Barristers, qualified in England and Wales, who are highly experienced in the field of Admiralty Law. They exercise the same powers and jurisdiction as were employed by the High Court of Justice in England in its Admiralty jurisdiction before Independence Day Stylianou v The Fishing Trawler "Narkissos" and Others (1965) 1 CLR 291.

The rules of practice and procedure are detailed in a schedule accompanying the Cyprus Admiralty Jurisdiction Order 1893 which was issued by Her Majesty Queen Victoria. According to rule 237, in cases where no provisions exist under the above rules, the rules and procedures of the Admiralty division of the High Court of Justice should be adhered to. According to Cyprus Case Law, the above rule refers to the rules and procedure applicable in England prior to Independence Day, i.e. 15 August 1960 Balm Maritime v Biochimie R.O.S.E. (1989) 1 CLR p.42.

The law was recently amended to empower the Supreme Court in its Admiralty jurisdiction to transfer certain Admiralty cases to the District Court if the disputed amount does not exceed ten thousand Cyprus pounds.

In order for a case to qualify as an Admiralty case, the subject matter must be one of those enumerated in S.1 of the Administration of Justice Act 1956 of England Essex Overseas v Legend Shipping (1981) 1CLR 142, Arizona Shipping v Armando Massar Marine (1989) 1CLR p.403.

Shipowners can be liable in contract to the charterer for breach of the charterparty agreement, to the shipper, as well as to the indorsees of the bill of lading or the consignees of the goods as a carrier and to his seamen for breach of their employment agreement. They may also find themselves liable in tort for negligence and/or breach of their statutory duties in collisions and deviation cases, as well as in cases relating to personal injuries or the death of seamen.

It is impossible to deal with every type of shipowner's liability in this article in sufficient detail so I have chosen to deal with the shipowner's liability as a carrier as well as outlining the possibilities of limiting shipowners' liability under Cyprus law.

It is often difficult for parties, suffering loss as a result of a breach of the contract of carriage, to decide against whom an action should be filed - it could be either against the shipowner or the charterer.

It is important to establish which party, particularly in cases where the Hague Rules apply and, according to III rule 6, there is a twelve-month limitation period within which to bring an action against the carrier. Filing an action against the wrong party may prevent you from suing the correct one after the twelve months have elapsed.

There are certain instances in which it is clear that the charterer is liable, such as in the case of a charterparty by demise or in cases whereby the charterer leads the other party to believe that he is responsible for carriage. In such a case, the charterer is estopped from claiming that the shipowner is liable rather than him personally.

Complications arise due to the principle of privity of contract, according to which a party may bring an action for breach of contract only against the person with whom he actually made a contract. Generally speaking, third parties are not entitled to sue under the terms of the contract unless the person who signed the contract was acting as their agent.

In the case of an existing charterparty agreement, which is not by demise, between the charterer and the shipowner, a shipowner could find himself contractually liable to the shipper of the goods, the consignees or the holder of the bill of lading. The master of the vessel is normally the agent of the shipowner and, in signing the bills of lading presented to him by the charterer, he thereby binds his shipowner in contract Karakiozopoulos & Others v "Ayia Marina" Ship (1980) 1CLR 19. In addition, the name of the shipowner, as opposed to that of the charterer, normally appears on the bill of lading. Even if the charterer signs the bill of lading, the shipowner can still be liable if the charterer signs the bill of lading on behalf of the master and the owners Tillmans v Knutsford (1908) AC 406.

In order to avoid liability, the shipowner may incorporate clauses in the charterparty agreement under which he will not be held personally liable and these restrict charterers from using certain bills of lading which are inconsistent with the charterparty agreement while at the same time incorporating the charterparty therein.

However, this does not necessarily prevent charterers from presenting bills of lading to the master which are inconsistent with the charterparty and include demise clauses or identity clauses which transfer liability to the shipowners. The bona fide holders of the bill of lading do not have the contents of the charterparty agreement in front of them and therefore are not expected to be entirely au fait with them. Besides, in the case of a demise clause, they are unaware of with whom they have concluded the contract. The demise clause has been criticised by Tetley due to its ambiguity but the English courts nevertheless accepted it. Despite this fact, however, other jurisdictions do not follow it. There is no case which indicates the position of courts in Cyprus but it is likely that they would follow English cases such as Berkshire (1974) 1 Lloyd's Rep. 185.

A contract between the shipowner and the consignee or the holder of the bill of lading is created by virtue of S.1 of the Bill of Lading Act 1855 which is still applicable in Cyprus (in the United Kingdom, the Carriage of Goods By Sea Act 1992 has been introduced and clarifies numerous grey areas which previously existed under the Bill of Lading Act).

Under the above section, a consignee or indorsee of a bill of lading may sue in contract provided that the property of the goods pass upon or by reason of such consignment or indorsement Electromatic Constructions v Azor Shipping & others (1988) 1CLR 768.

The following are the main views which have developed in England with regard to the interpretation of the above section:

i) the view according to which the property or the goods should pass simultaneously with indorsement for the section to be applicable

ii) the intermediate view - even if the property passes at some time other than the moment when the bills of lading are endorsed and transferred, S.1 applies provided that the act of indorsement forms an essential link in the chain of events by which title is transferred

iii) the wider view - property needs only to pass from the shipper to the consignee or indorsee under a contract in which the goods are consigned to him or in pursuance of which the bill of lading is endorsed.

In Delphini (1990)1 Lloyds 282, the intermediate view was adopted. In Cyprus, this matter has not been analysed in any specific case but the Delphini case will have a highly influential effect when this matter is at issue.

The Hague Rules apply in Cyprus by way of the Carriage of Goods by Sea Law Cap. 263 in cases where the carriage of goods is effected by ships carrying goods from any port in Cyprus to any other port outside Cyprus or in cases where a paramount clause is applied "Ntama and Another v Georgiades (1980) 1CLR 381.

In Cyprus, according to IV rule 5 of the Hague Rules, the carrier may limit his liability to 100 gold value per package or unit for any loss or damage to the goods in case the value is not declared in the bill of lading. According to the Cyprus case

Loizos Louca & Sons Ltd v Balsi Shipping Ltd, case no. 207/89 (10.7.92), which followed Rosa S. (1989) 1 All ER 489, 100 gold value means its equivalent in Cyprus pounds according to the records of the Central Bank of Cyprus.

There are two schools of thought regarding this issue. Some maintain that the MSA 1894 applies and that, according to S.503 (1) (i) and (ii), the shipowner may limit his liability to CY£15 and CY£8 per ton whilst others claim that the MSA 1958 applies and that liability may be limited to 3100 gold francs and 1000 respectively.

Although as far as I know, there are currently two pending cases, in court there are no decided cases on this matter. However, in my view, the provisions regarding the limitation of liability of the MSA 1894 should apply because the above Act was extended to Cyprus by S.509 of the Act and to the whole of Her Majesty's independent dominion, whereas the MSA 1958 was not.

According to S.29 (2) of the Court of Justice Act 1960, subject to paragraphs (c) and (e) of sub-section 1, the Admiralty Court shall apply the law which was applied by the High Court of Justice in England in the exercise of its Admiralty jurisdiction prior to Independence Day.

If one were to read this section in isolation without it being subject to paragraph (e) it would seem logical that the MSA 1958 should apply. However, after reading paragraph (e) - "The acts of parliament of the United Kingdom of Great Britain and Northern Ireland which were applicable to Cyprus immediately before Independence Day" - one could safely argue that any acts incorporated through S.29 (2) (a) in Cyprus should be subject to the provisions of statutes already applicable in Cyprus before independence. Therefore, in case of limitation of liability, the sums of £8 and £15 should prevail and not the sum of 3100 gold francs and 1000 gold francs. The Department of Merchant Shipping in Cyprus, however, takes the opposite view.