Standard Club has noted that its members were regularly exploring new opportunities in diverse territories and thus frequently needed to ask how the law in a particular jurisdiction might impact the enforceability of key contractual provisions.
Standard Club has therefore produced a list of key offshore jurisdictions and how the various relevant laws apply.
The study specifically looks at:
- the right to limit liability (specifically in respect of wreck removal)
- the application and geographical reach of the CLC Convention, Wreck Removal Convention, Maritime Labour Convention or any related domestic legislation
- the enforceability of knock-for-knock provisions in a contract and whether there are any gross negligence or wilful misconduct exceptions to this.
The jurisdictions covered are:
- Angola
- Australia
- Brazil
- India
- Indonesia
- Malaysia
- Mexico
- Nigeria
- Norway
- Qatar
- Saudi Arabia
- Singapore
- Thailand
- UK
- USA
The full guide is available at:
http://www.standard-club.com/media/2767858/a-guide-to-key-offshore-jurisdictions.pdf
IMN intends to provide a daily country-by country summary.
3) Brazil
Q: Is Brazil signatory to an international convention relating to limitation of liability for maritime claims? If not, can shipowners limit their liability under local law?
A: Brazil has not ratified the International Convention relating to the Limitation of the Liability of Owners of Sea Going Ships, 1957; the Convention on the Limitation of Liability for Maritime Claims, 1976; nor the 1996 Protocol to Amend the Convention on Limitation of Liability for Maritime Claims 1976. Brazil is party to the 1924 Brussels Convention, which establishes a few rules related to the limitation of liability and entitles a shipowner to limit his liability to an amount equal to the value of the vessel, the freight and the accessories of the vessel in particular circumstances. The Brazilian Civil Code of 2002, on the other hand, does not provide for limitation and establishes that anyone who causes damage to the other party must fully compensate the damages caused. Hence, considering that the Code is subsequent to the 1924 Convention, owners may encounter difficulties in applying the limitation in court. In theory, shipowners would be able to limit liability under a contract. There are some cases where the limitation of liability was tested and judges accepted the validity of such limitation. Nevertheless, if the contract is considered a ‘standard form contract’, the limitation clause might be considered null and void by Brazilian courts.
Q: What is the geographical application of the international convention or the local law under which shipowners can limit their liability?
A: The geographical application of the 1924 Brussels Convention is restricted to the territories of the signatory countries. The Brazilian territorial waters are limited to 12nm from the low water line along the Brazilian coast. The Brazilian Civil Code is a federal rule applicable throughout the Brazilian territory.
Q: Are there any exclusions or exceptions in respect of offshore vessel types?
A: There are no exclusions or exceptions in the Brazilian Civil Code in relation to offshore vessel types.
Q: Is it possible to limit for wreck removal in Brazil?
A: No, it is not possible to limit for wreck removal in Brazil. Wreck removal in Brazil is regulated by Law no. 7,542/1986 and by the Normative Resolution no. 10 (NORMAN 10).
Q: Is Brazil signatory to the Bunkers Convention?
A: Brazil has not ratified the Bunkers Convention. However, Brazil does have internal regulations concerning the matter of oil pollution, such as the Brazilian Environmental Policy Act, the Law of Environmental Crimes, which provides for the penal and administrative sanctions arising from the breach of environmental laws and other activities in any way harmful to the environment; and the Oil Law 2002, which provides for the prevention, control and monitoring of pollution caused by the release of oil and other harmful or
dangerous substances in waters under national jurisdiction.
Q: What is the geographical application of the abovementioned internal regulations?
A: All regulations indicated above are federal laws applicable throughout the Brazilian territory, including waters under national jurisdiction. In this regard, the Oil Law specifically determines that it shall consider the following as waters under national jurisdiction:
(i) inland waters
(ii) maritime waters, all waters under national jurisdiction other than inland waters, namely:
- Brazilian territorial waters
- waters covered by a range extending from 12nm to 200nm from the baselines used to measure the territorial waters, which constitute the exclusive economic zone (EEZ)
- the waters overlying the continental shelf when it exceeds the limits of the EEZ.
Q: Are there any exclusions or exceptions in respect of offshore vessel types?
A: There are no exceptions in relation to offshore vessel types in respect of the internal regulations indicated above.
Q: Is Brazil signatory to the International Convention on Civil Liability for Oil Pollution Damage (CLC)?
A: Brazil is signatory to the CLC 1969. The Convention was approved by the National Congress in September 1976 and came into force in March 1977, without any restrictions to its original text. Brazil is not a signatory to the CLC 1992.
Q: What is the geographical application of the CLC in respect of Brazil?
A: Considering that Brazil approved CLC 1969 without making any reservations to its directives, CLC 1969 applies to Brazilian territorial waters. Law no. 8.617/1993 defines the Brazilian ‘territorial sea’ as a range of 12nm miles measured from the low water line of the continental and insular littoral.
Q: Are there any exclusions or exceptions in respect of offshore vessel types?
A: No. There are no specific exclusions or exceptions in respect of offshore vessel types. The CLC 69 applies to ‘any sea going vessel and any seaborne craft of any type whatsoever, actually carrying oil in bulk as cargo’. Any vessel falling within said criteria will be subjected to the Convention.
Q: Is Brazil signatory to the Nairobi International Convention on the Removal of Wrecks (WRC)?
A: No. The WRC has not been ratified by Brazil. Wreck removal in Brazil is regulated by Law no. 7.542/1986, which regulates the research, exploitation, removal and demolition of objects or properties sunk, submerged, stranded and lost in waters under national jurisdiction, on marine land and on marginal land, and by the Normative Resolution no. 10 (NORMAN 10), which is enacted by the Directorate of Ports and Coasts (DPC) to establish standards and procedures for authorising the research, removal, demolition or exploitation of wrecks. Said legislation establishes procedures for the removal and exploitation of sunken objects, determining who is liable for the removal and damages arising from it.
According to Brazilian regulation, both the owner of the asset sunk and its insurer, who covered specifically the risks of research, exploitation, removal or demolition of such goods, are jointly liable for damages caused, directly or indirectly, to the safety of navigation, to third parties or to the environment, until the goods are removed or demolished. There is no cap or limitation on such liability. The owner of the asset sunk would have a cause of action brought against him firstly. Nonetheless, the Brazilian jurisprudential understanding nowadays is moving towards the recognition that both the owner of the asset sunk and its insurer can be co-defendants.
In the specific case of the P&I clubs, there have been cases in Brazil where parties attempted to treat clubs as insurers, bringing a claim directly against the club. A very recent decision from the Court of Appeals of Rio de Janeiro dismissed a case brought against a club directly, stating that the club could not be treated as an insurer. Although this is a very important precedent, it is not binding. If the club does not have a legal entity established in Brazil, the most common procedure is to accept a Letter of Undertaking issued by the club as a guarantee of the future payment due. Brazilian Law expressly recognizes as species of security the deposit in cash and bank guarantee. However, the Brazilian Civil Procedure Code does not forbid any type of credit guarantee, as long as it is accepted by the creditor. Therefore, a guarantee if accepted by the creditor may be accepted by the Brazilian Courts.
Q: What is the geographical application of the local regulations outlined above?
A: Law no. 7.542/1986 is a federal law applicable throughout the Brazilian territory, in waters under national jurisdiction, on navy properties and its
surpluses, and on marginal lands. NORMAN 10 is a regulation whose application is restricted to the Brazilian Jurisdictional Waters (AJB), which are defined as inland waters and maritime areas in which Brazil has jurisdiction to some extent over activities, persons, facilities, vessels, and living and non-living natural resources found in the liquid mass, in the seabed or subsoil, for control and inspection purposes, within the limits of international and national legislation. These maritime spaces comprise the 200nm from the baselines, plus the waters overlying the extension of the continental shelf beyond such 200 nautical miles, where it occurs.
Q: Are there any exclusions or exceptions in respect of offshore vessel types?
A: No. There are no exclusions or exceptions in relation to offshore vessel types.
Q: Is Brazil signatory to the Maritime Labour Convention (MLC)?
A: No. Brazil is not signatory to the MLC 2006.
Q: Is ‘gross negligence’ or ‘wilful misconduct’ recognised as a legal concept under Brazilian law?
A: Brazil has the concepts of ‘culpa’ (fault) and ‘dolo’ (wilful misconduct). Both concepts admit active actions as well as omissions; therefore, ‘dolo’ could be compared to gross negligence and wilful misconduct.
Q: Is the knock for knock liability regime a recognised concept under Brazilian law?
A: Brazilian law is based on civil rules, and indemnities are governed by the Brazilian Civil Code. A basic principle of Brazilian civil law is that any person who causes damage to another must indemnify the aggrieved party in a form proportional to the damage suffered. Additionally, the Brazilian Civil Code provides that each party shall be fully responsible for the acts of its employees and subcontractors. The principles adopted by Brazilian law are quite different from the principles set out in the standard knock for knock clauses. Notwithstanding this, Brazilian law accepts freedom of contract, which means that the parties are free to establish the clauses and conditions of the contracts as long as such terms and conditions do not contradict matters of public order or affect third parties’ interests. However, up to this date, there has been no case law in Brazilian courts discussing the application of knock for knock clauses under Brazilian law contracts.
Q: If knock for knock is a recognised liability regime under Brazilian law, would it be upheld in the event of ‘gross negligence’ or ‘wilful misconduct’?
A: The regime itself is not recognised in Brazil, so it would be a matter of analysing the terms of contractual clause.
Q: Would industry standard contracts such as BIMCO’s TOWCON, TOWHIRE, SUPPLYTIME, WRECKHIRE, WRECKSTAGE, WRECKFIXED and HEAVYCON be upheld under Brazilian law?
A: In Brazil, it is common for international oil companies to adopt their own contract terms or the traditional standard forms, usually incorporating the knock for knock principle. When freely negotiated between the parties, the standard contracts and the knock for knock clause would, in principle, be valid. Nevertheless, if the contract is considered a standard form contract, such clause might be considered null and void by Brazilian courts. Considering that offshore contractors and oil companies are usually considered equal with respect to their bargaining strength, it is unlikely that a contract between such parties would be considered a standard form contract and deemed null and void on this basis.
For further information, contact
Angeles Aguado
Claims Executive, Offshore
+44 20 7522 6484
Godofredo Mendes Vianna
Partner, Kincaid
+55 21 2276 6200
Livia Sanches Sancio
Associate, Kincaid
+55 21 2276 6262
Juliana Furtado Senna
Associate, Kincaid
+55 21 2276 6272