Exposing class liability

CLASSIFICATION societies perform both public functions, under statutory authority as delegates of government, and private functions, as ship surveyors. They are therefore employed by both governments and private interests such as shipowners, insurers, etc. They are responsible for certifying whether vessels comply with various state and international standards concerning, for example, safety, environment protection and anti-pollution measures, as well as with their own standards for the construction, maintenance and operation of vessels.

Classification societies also carry out ship surveying and damage investigation and are, therefore, directly or indirectly, involved with many types of operators in the shipping industry such as insurers, potential purchasers, owners and charterers. Due to the variety of the services they provide and the growing trend for those who suffer losses to seek compensation from those who supposedly have ‘deep pockets’, classification societies are increasingly seeing their liability sought for negligence on both sides of the Atlantic. The fact that no international convention or uniform legal regime exists on this subject, despite some CMI initiatives, means that the regimes of liability for classification societies differ significantly in the US, England and France.

Liability in contract

In 1972, the New York District Court (Tradeways II) dismissed the action in contract brought by shipowners on the basis that the classification society was not guaranteeing the seaworthiness of the vessel and was simply responsible for inspecting the conformity of the vessel with the relevant standards. As a result, the owners should assume the loss of the vessel, the defects of which were perfectly known by them.

A similar decision was reached in the Amoco Cadiz and, more recently, by the second circuit Court of Appeal which held that the objective of the classification certificate was not to guarantee the seaworthiness of the vessel but to formalise certain obligations which must be met for the delivery of the certificate.

Very few decisions have been rendered in France on this subject. The French Supreme Court, or Cour de Cassation, held in a decision in 1923 that a classification society was liable for the gross negligence committed by one of its surveyors as the vessel condition was not in accordance with the terms of the delivered certificate. The Court of Appeal of Versailles confirmed this position by holding that Bureau Veritas was not entitled to rely on its contractual limitations because of the gross negligence or wilful misconduct it committed within the performance of its contractual obligations.

Liability in torts

The French courts are clearly less favourable to classification societies than the US and English courts. In the Morning Watch decision (Mariola Marine Corp v Lloyd’s Register of Shipping), the English court prevented a third party from seeking Lloyd’s Register of Shipping liability on the basis that the latter did not owe any particular ‘duty of care’. This was the consequence of an insufficient relationship of proximity between the body performing the function and the claimant who suffered the loss.

In the Nicholas H (Marc Rich and Co AG v Bishop Rock Marine Co Ltd), the House of Lords refused to hold the classification society liable in tort to the claimant third party who suffered loss as a result of the society’s negligence in issuing a classification certificate. This decision was reached on the basis that the society did not owe a ‘duty of care’ to the third party. However, the reasons behind the House of Lords decision were not the lack of or the insufficient proximity between the society and the claimant in tort, but the fact that imposing such a ‘duty of care’ (in tort) to the society would not be ‘just’, ‘fair’ and ‘reasonable’.

More recently, the English Court of Appeal held that the owner of an air control organism owed a ‘duty of care’ to the owner of a tourism aircraft to whom it delivered a flight capacity certificate (Perrett v Collins). And in 1988, The New Jersey District Court decided that a ‘duty of care’ should be imposed on classification societies which issue certificates upon which the parties to a carriage by sea will rely (Somarelf v American Bureau of Shipping).

That said, involving the liability in tort of classification societies in the US and the UK appears to be very difficult. The test is less tough before the French courts as they tend to hold classification societies liable for negligence on the grounds of Article 1382 of the civil code, which simply requires proof of negligence from which the loss arose.

Whilst the proof of gross negligence or recklessness should not be required under French law to involve the liability in tort of a classification society, as long as such liability is based upon Article 1382 of the civil code, it appears that the most recent decisions on the subject have retained the liability in tort of the classification society on the basis that it committed gross negligence within the performance of its function, or rejected it because no such negligence was committed.

It should also be mentioned that the 2001 European Union Directive adopted shortly after the Erika disaster tends to strengthen the liability of the classification societies. Article 6 of the directive states that an administration that would be held liable to a third party which suffered damage as a consequence of negligence by an expert of a classification society, acting under statutory authority as a delegate of government, would be entitled to exercise a recourse action against the responsible classification society. Although the directive has not been implemented as yet, it shows that the classification societies’ liability will be increasingly exposed.