I COMMERCIAL OVERVIEW OF THE SHIPPING INDUSTRY
According to information provided by the Chilean Maritime Authority,2 as at December 2016 there were 116 shipowners with approximately 235 Chilean-flagged merchant ships.
The top five shipping companies in terms of tonnage are Naviera Ultranav Ltda, Naviera Los Inmigrantes SA, Sociedad Nacional Marítima SA, Naviera Chilena del Pacífico SA and CSAV Austral SA. To register a ship in Chile, the legal requirements are very demanding. Merchant vessels may be registered by Chilean nationals or citizens. If the owner is a corporation, it must meet the following requirements to be deemed Chilean:
- have its registered offices and true and effective headquarters in Chile;
- the president, manager and majority of directors or administrators, as the case may be, must be Chilean; and
- the majority of the equity capital must be owned by Chilean individuals or bodies corporate.
Special vessels may be registered in Chile by foreign natural persons as long as they are domiciled in the country and their main place of business is located locally (note that this rule does not apply to fishing vessels).
According to the Chilean Maritime Authority, the tonnage moved through Chilean ports in 2016 was 61.19 million tonnes in export cargo and 52.57 million tonnes in import cargo. In addition, Chilean seaports have connections with practically all the world’s ports.
II GENERAL OVERVIEW OF THE LEGISLATIVE FRAMEWORK
The Chilean legislative framework is constructed from various regulations and laws, for which the main sources are as follows:
- Book III of the Chilean Code of Commerce, ‘About Navigation and Maritime Trade’ (Articles 823 to 1250), which includes general provisions and specific chapters on vessel ownership, liens, shipowners, masters, ship agents, navigation contracts, navigation risks, marine insurance and procedural issues;
- the Navigation Law (Decree Law 2222/78);3
- the Merchant Navy Law (Decree Law 3059/79);
- international conventions, such as the Hamburg Rules, SOLAS and the CLC Convention; and
- regulations issued by the Chilean Maritime Authority.
III FORUM AND JURISDICTION
Article 1203 of the Chilean Commercial Code establishes the general principle that the resolution of any maritime dispute, including those relating to marine insurance, is subject to mandatory arbitration. In short, all maritime disputes must be resolved by an arbitrator.
However, the ordinary civil courts may hear maritime disputes in certain cases, including:
- if the parties mutually agree to this (either by including it in the contract from which the dispute originates or by prior written agreement);
- if a criminal action could arise from the same facts (in this case the civil action can be filed before either the criminal court or an arbitrator);
- claims relating to oil pollution contained under Paragraph 4, Title IX of the Navigation Law;
- claims in which the state harbour or customs agencies are involved; and
- claims in which the amount at stake is less than 5,000 units of account (special drawing rights (SDRs), as defined by the International Monetary Fund), provided that the claimant submits its claim before the ordinary courts.
In addition, specific petitions for the appointment of an arbitrator and ship arrest are heard by ordinary civil courts.
As regards limitation periods, under Chilean law the general principle is that any action relating to maritime disputes is time-barred for two years. Note, however, that actions relating to passage contracts, freight, general average and contributions are time-barred after six months. In addition, in collision actions, the two-year period is extended to three years if the responsible vessel was not arrested or detained while in Chilean jurisdictional waters, provided that the vessel leaves Chilean jurisdictional waters without calling at a Chilean port after the collision.
As regards time extensions, the progress of the appropriate limitation period can be interrupted by a declaration in writing to the claimant by the person who benefits from it. Time extensions can be granted several times but the limitation period will start again from the date of the most recent declaration.
ii Mandatory arbitration
The resolution of maritime disputes is subject to mandatory arbitration. The key principle is that the applicable rules are those to which the parties have agreed in writing. If the parties reach no agreement, the matter is subject to the rules set out by the Tribunal Code and the Civil Procedure Code.
Special powers of maritime arbitrators
The Commercial Code establishes special powers for maritime arbitrators as follows:
- ample freedom to admit any evidence that the arbitrator may deem relevant;
- a proactive role for the avoidance of delays within the trial; and
- the ability to consider the evidence under the ‘rule of the sane critic’, which allows the arbitrator to assess the evidence according to his or her own criteria.
Pre-judicial measures and special liens
If pre-judicial measures (whether preparatory, precautionary or evidential) or special liens need to be enforced before the arbitration tribunal is established, the interested party can petition for these before the competent ordinary civil court under the rules of the Tribunal Code or the Commercial Code.
iii Enforcement of foreign judgments and arbitral awards
Foreign judgments and arbitral awards are enforced through the exequatur process. This is considered in the Civil Procedure Code, under which judgments issued in a foreign country shall be given force in Chile by existing treaties. In order for a foreign judgment to be enforced, the procedures set out in Chilean law shall be followed unless they have been modified by existing treaties. If there are no treaties related to the matter, Chile shall grant to the judgment the same force as granted to Chilean judgments by the jurisdiction in which the judgment was made. If the judgment comes from a jurisdiction that does not enforce Chilean judgments, it shall not be enforced in Chile. If none of the previous rules may be applied, foreign judgments shall be enforced in Chile provided that:
- they contain nothing contrary to the laws of the Republic, except that procedural rules to which the case would have been subject in Chile shall not be considered;
- they are not contrary to national jurisdiction;
- the party against whom enforcement is sought was duly served with process, except that the party may still be able to allege that for other reasons, it was prevented from making a defence; and
- they are not subject to appeals or further review in the country of origin.
A duly legalised copy of the judgment – officially translated into Spanish, if necessary – must be presented to the Chilean Supreme Court to begin the exequatur process. In the case of an arbitral award, its authenticity must be certified by attestation of a High Court of the originating jurisdiction.
Notice of the enforcement request must be served on the party against whom it is sought. That party shall have 15 days (which may be extended depending on where the party is domiciled) to respond. An opinion from an independent court official is also requested by the Supreme Court.
The Supreme Court considers the matter in a hearing at which the parties may make oral statements.
After enforcement is allowed, the judgment must be presented to the competent civil court to commence an executive proceeding (under which the defendant’s assets can be foreclosed, if applicable).
In respect of foreign arbitral awards, a law on international commercial arbitration – based entirely on the UNCITRAL Model Law – was passed in 2004.4 Article 35 of that law regulates the recognition and enforcement of foreign arbitral awards and Article 36 lists the defences that can be asserted against enforcement and regulates orders of stay. Chile is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. In this respect, Chilean courts have enforced all foreign arbitral awards that comply with the rules set out in the law for enforcement.
IV SHIPPING CONTRACTS
Chile does not undertake a significant amount of shipbuilding.
ii Contracts of carriage
In 1982, Chile ratified the Hamburg Rules, which entered into force internationally as of 1 November 1992. Additionally, the Chilean legislature included the provisions of the Hamburg Rules in the Chilean Commercial Code in 1988,5 with minimal changes.
A cabotage reservation system is in force under the Merchant Navy Law (Decree Law 3059/79). The Law implies that only Chilean vessels are permitted to provide maritime or fluvial transport services (of cargo or passengers) within the national territory or the exclusive economic zone. On exceptional occasions, foreign vessels may participate in cabotage when:
- cargo volumes exceed 900 tonnes, and where a previous public bid has been carried out by the user in advance; or
- cargo volumes are equal to or less than 900 tonnes when Chilean-flagged vessels are not available (provided that authorisation has been obtained from the Maritime Authority).
Chilean law recognises the concept of maritime privileges (see Section V.i).
How the duties and liabilities of the shipper are addressed
In accordance with the Chilean adoption of the Hamburg Rules, ‘shipper’ means ‘any person by whom or in whose name or on whose behalf a contract of carriage of goods by sea has been concluded with a carrier, and any person by whom or in whose name or on whose behalf the goods are actually delivered to the carrier in relation to the contract of carriage by sea’. In line with Chilean practice, the scope of this definition includes both the person concluding the contract of carriage of goods by sea and the person actually delivering the cargo, provided they are not the same person.
The shipper is deemed to have guaranteed to the carrier the accuracy of particulars relating to the general nature of the goods, their marks, number, weight and quantity as furnished by him or her for inclusion in the bill of lading. The shipper must indemnify the carrier against any loss resulting from inaccuracies in these particulars. The shipper remains liable even if the bill of lading has been transferred by him or her. The right of the carrier to such indemnity in no way limits his or her liability under the contract of carriage by sea to any person other than the shipper.
Operation of multimodal bills of lading
The main rules regarding multimodal transport can be found in Articles 1041 et seq. of the Chilean Commercial Code, which are based on the United Nations Convention on International Multimodal Transport of Goods (Geneva, 24 May 1980). Article 1041 defines the main concepts applicable to multimodal transport: multimodal transport, contract of multimodal transport and operator of multimodal transport. Furthermore, Article 1043 sets out the regime of liability applicable in multimodal transport. The relevance of this article is that, under Chilean law, the liability of all those involved in any part or parts of the multimodal transport is joint. Likewise, the Hamburg Rules must be taken into consideration when dealing with multimodal transport, especially in connection with the limitation of responsibility set out by the Hamburg Rules, of which Chile is a signatory.
iii Cargo claims
Carriage of goods by sea
Under the Chilean adoption of the Hamburg Rules, any party may be subject to the provisions of the rules regarding carriage of goods by sea if:
- the port of loading or discharge as provided for in the contract of carriage by sea is located in Chile;
- the bill of lading or other document evidencing the contract of carriage by sea (such as the sea waybill, or through bills of lading or short-form bills of lading) stipulates that the contract will be governed by Chilean law (such as through a clause paramount); or
- one of the optional ports of discharge provided for in the contract of carriage by sea is the actual port of discharge and that port is located in Chile.
Chilean regulations are compulsorily applicable regardless of the nationality of the ship, carrier, actual carrier, shipper, consignee or any other interested person. In this respect it is important to note that clauses paramount have been held as unwritten by the Supreme Court6 as they would be contrary to public policy.
The Chilean regulations are applicable to all contracts of carriage by sea and it is not a condition that they are necessarily evidenced in a bill of lading or other document of title, such as a sea waybill or short-sea note. In respect of combined transport bills or through bills of lading, the regulations are applicable only to the corresponding sea-leg carriage.
The Chilean adoption of the Hamburg Rules does not apply to charterparties. Nonetheless, a bill of lading issued in compliance with a charterparty falls under these Rules if it governs the relation between the carrier and the holder of the bill of lading other than the charterer. In the case of contracts providing for future carriage of goods in a series of shipments during an agreed period (e.g., tonnage or volume contracts used for cargo projects), the Rules apply to each shipment. However, where a shipment is made under a charterparty, the Rules do not operate, except with the aforementioned exception.
Chilean law recognises a basic distinction between the carrier (also known as the contractual carrier) and the actual carrier. The former is defined as ‘any person by whom or in whose name a contract of carriage of goods by sea has been concluded with a shipper’ and the latter as ‘any person to whom the performance of the carriage of the goods, or part of the carriage, has been entrusted by the carrier, and includes any other person to whom such performance has been entrusted’.7
The above distinction has very much simplified the problem of identifying the carrier as anyone who issues a bill of lading as a principal may be treated as a contractual carrier. This applies even to freight forwarders in case they issue their own ‘house’ bill of lading and many cargo claims are based on these documents. In this regard it is important to note that under Chilean practice, demise clauses have no effect.
Where the performance of the carriage or part thereof has been entrusted to an actual carrier, the carrier nevertheless remains responsible for the entire carriage. In this respect, the carrier is jointly and severally responsible, in relation to the carriage performed by the actual carrier, for the acts and omissions of the actual carrier and of his or her servants and agents acting within the scope of their employment. Additionally, all the provisions governing the responsibility of the carrier also apply to the responsibility of the actual carrier for the carriage performed by him or her.8
iv Limitation of liability
Chilean regulations that refer to tonnage limitation (i.e., Articles 889 to 904 of the Commercial Code) are inspired by both the international conventions signed in Brussels in 1957 (the 1957 Convention) and in London in 1976 (the 1976 Convention). With respect to the tonnage limitation figures, the Commercial Code follows the lines of the 1976 Convention. In addition, note that the Commercial Code establishes a specific set of procedural provisions in connection with the constitution and distribution of the corresponding limitation fund.
The types of claims subject to limitation are as follows:
- death or personal injury and damage to property on board;
- death or personal injury caused by any person for whom the owner is responsible, whether on board or on shore (in the latter case, his or her acts must be related to the operation of the ship or to the loading, discharging or carriage of the relevant goods);
- loss or damage to other goods, including the cargo, caused by same person or people, grounds, places and circumstances as given in point (b); and
- resulting liability related to the damage caused by a vessel to harbour works, dry docks, basins and waterways.
The people entitled to limit pursuant to this regime are as follows:
- the shipowner as defined by Chilean regulations;
- the shipowner’s staff;
- liability insurers;
- the operator, carrier, charterer and the ship’s proprietor, if a different person or entity from that specified in point (a); and
- individual employees of any person specified in point (d), including the master and members of the crew, if sued.
Limitation in connection with civil liability for damage derived from spillage of hydrocarbons and other hazardous substances
The spillage of hydrocarbons from seagoing vessels carrying oil in bulk as cargo is subject to the CLC Convention 1992. On the other hand, the spillage of hydrocarbons from vessels not carrying oil in bulk as cargo, or spillage of other hazardous substances, is subject to the terms of the CLC Convention 1969 and supplementary norms set forth by the Chilean Navigation Law (among other things, it extends the limitation benefit to the owner, proprietor and operator).
Carriage of goods by sea
Chilean law draws a distinction between lost or damaged goods and delayed goods. In the former case, the carrier’s liability is limited to an amount equal to 835 SDRs per package or other shipping unit, or 2.5 SDRs per kilogram of gross weight, if the latter is higher. In the case of delayed goods, the carrier’s liability is limited to an amount equivalent to 2.5 times the freight payable for the goods delayed, but not exceeding the total sum of the freight payable under the contract of carriage by sea. The aforementioned rules do not include either the interest on the value of the damaged goods or judicial costs.
Under the Chilean regulations that refer to passage contracts,9 liability can be limited in the following cases:
- passenger’s death or personal injury: the maximum liability amount is obtained by multiplying 46,666 SDRs by the number of passengers that the vessel is authorised to carry, up to a maximum equal to 25 million SDRs; and
- damage to property on board: up to 1,200 SDRs unless higher limits have been agreed in writing.
i Ship arrest
Chile has not ratified any international conventions regarding the arrest of ships. However, the fundamental regulations applicable to ship arrest that are found in Book III, Title VIII, Paragraph 5 of the Commercial Code (‘About the Procedure to Arrest Vessels and its Release’)10 are loosely based on the principles set forth under the Brussels Convention.
Under Chilean law, a vessel may be arrested if the requesting party has a credit that entitles it to do so. These credits may be of two types:
- privileged credits as set forth by Articles 844, 845 and 846 of the Chilean Commercial Code (listed below); and
- credits other than those mentioned in point (a).
Under Chilean law, there is no statutory definition for privileged credits. However, they may be defined as those that give rise to a maritime lien and allow for requesting an arrest pursuant to the special rules set forth by Book III, Title VIII, Paragraph 5 of the Commercial Code. Articles 844, 845 and 846 of the Commercial Code establish and distinguish the following groups of privileged credits.
- Legal costs and other disbursements caused by reason of a suit, in the common interest of the creditors, for the preservation of the vessel or for its forced alienation and distribution of the yield.
- The remuneration and other benefits arising from the contracts of embarkation of the vessel’s crew, in accordance with labour regulations and civil law that regulate the concurrence of these credits, together with the emoluments paid to the pilots at the service of the vessel. This privilege applies to the indemnities that are due for death or bodily injury of the servants who survive ashore, on board or in the water, and always provided that they stem from accidents related directly to the trading of the vessel.
- The charges and rates of ports, channels and navigable waters, as well as fiscal charges in respect of signalling and pilotage.
- The expenses and remunerations due in respect of assistance rendered at sea and general average contribution. This privilege applies to the reimbursement of expenses and sacrifices incurred by the authority or third parties, in order to prevent or minimise pollution damage or hydrocarbon spills or other contaminating substances to the environment or third-party property, when the limitation fund has not been constituted as established in Title IX of the Chilean Law of Navigation.
- The indemnities for damage or loss caused to other vessels, to port works, piers or navigable waters or to cargo or luggage, as a consequence of a collision or other accident during navigation, when the respective action is not susceptible to be founded upon a contract, and the damage in respect of bodily injury to the passengers and crew of these other vessels.
Mortgage credits on large vessels (i.e., those over 50 gross tonnage (GT)) and secured credits on minor vessels (i.e., vessels up to 50 GT).
- Credits in respect of the sale price, construction, repair and equipping of the vessel.
- Credits in respect of the supply of products or materials that are indispensable for the trading or conservation of the vessel.
- Credits arising from contracts of passage money, affreightment or carriage of goods, including the indemnities for damages, lack and short deliveries in cargo and luggage, and the credits deriving from damages in respect of contamination or the spilling of hydrocarbons or other contaminating substances.
- Credits in respect of disbursements incurred by the master, agents or third parties, for account of the owner, for the purpose of trading the vessel, including agency service.
- Credits in respect of insurance premiums concerning the vessel, be they hull, machinery or third-party liability.
The privileged credits of Article 844 enjoy privilege over the vessel in the order enumerated in Article 844 credits, above, with preference over mortgage credits and the privileged credits of Article 846. Mortgage credits are preferred to those of Article 846, which in turn follow the rank indicated under Article 846 credits, above.
In this respect, the privileged credits established by the aforementioned provisions have preference over and exclude all other general or specific privileges regulated by other legal bodies, when referring to the same goods and rights. However, the rules regarding priorities and privileges in matters of pollution or for avoiding damage from spills of hazardous substances, which are established in international treaties in force in Chile and in the Navigation Law, have preference over the provisions of Book III, Title III of the Commercial Code (‘About Privileges and Naval Mortgage’) in the specific matters to which they refer.
Procedure for ship arrest
An arrest order is usually granted quickly if the arrest petitioner supplies the court with sufficient supporting documents to justify the arrest petition, such as invoices, bills of lading, contracts and survey or loss reports.
Arrest or retention of a vessel is served by the maritime authority where the vessel lies or by official letter or notification to the Director General of the Maritime Territory and the Merchant Marine if the vessel is not in the jurisdiction of the court that decreed the measure. Prior notification to the person against whom the measure is requested is unnecessary.
In urgent cases, the court may communicate arrest via telegram, telex or other reliable means. In a preliminary proceeding, the person against whom the arrest is requested must also be notified within 10 days of the resolution that granted the measure. This may be extended by the court for good reason. If an arrest or retention is not served within 10 days, or any extension granted, this causes automatic forfeiture of the decreed arrest, which is communicated directly to the Maritime Authority by the court.
Arrests of sister and associated ships
A lien on a ship granted by a privileged credit can be exercised not only against the actual ship to which the privileged credit relates, but also on a ship in the same ownership or a ship in the same administration or operated by the same person.
Security and counter-security
If the court considers that the supporting documents provided by the arrest petitioner are not sufficient, or the petitioner states that they are not yet available to him or her, the court may require that counter-security be provided for the potential damages that may be result if, subsequently, it is found that the petition lacked basis. As to the form and amount of damages, there are no specific rules, so it is up to the court.
As regards security for lifting an arrest, the amount of security is usually established by the court based on the petition of the arresting party. The amount cannot exceed the value of the arrested vessel and can be reviewed subsequently through incidental proceedings. Regarding the form of security, there are no specific rules and it will depend on the court’s resolution, but the security most usually requested and granted is a bank guarantee issued by order of the court. As soon as the security is provided, the court shall lift the vessel arrest without delay.
For a long time, protection and indemnity insurance (P&I) club letters of undertaking were accepted only if agreed by the arrest petitioner, mainly because of the fact that the Chilean courts were not accustomed to them. However, in a recent case of an arrest following a pollution case, the court hearing the arrest accepted a letter of undertaking with no prior approval from the arrest petitioner. This is a positive development, as Chilean courts seem finally to be aligned with international practice, whereby a letter of undertaking is accepted by the courts as sufficient security.
First of all, under Chilean regulations, an arrest based on privileged credits is subject to the following conditions:
- The arresting party must invoke one or more of the privileged credits enumerated above. In this respect, note that, except for the regulations related to pollution or for avoiding damage from spills of hazardous substances, maritime privileges preclude any other general or special privilege regulated by other laws in connection with the same goods. Maritime privileges also confer upon the creditor the right to pursue the vessel in whosoever’s possession it may be.
- The arresting party must attach antecedents that constitute presumption of the right being claimed.
- If the court considers that the supporting documents are not sufficient or the petitioner states they are not yet available to him or her, the court may require that counter-security be provided for the potential damage that may be caused if, subsequently, it is found that the petition lacked basis.
Second, when an arrest has been decreed as a pre-judicial precautionary measure (i.e., a measure to secure the outcome of a subsequent substantive action), the petitioner is obliged to file its complaint requesting that the decreed arrest remain in force within a period that, in principle, is 10 days, but that may be extended for up to a total of 30 days, provided there is a sound basis for doing so. The non-fulfilment of this obligation will result in cancellation of the arrest and liability for the damage that may have been caused, on the irrefutable presumption that the grounds for the arrest were fraudulent. In addition, if the arrest was wrongful, fraudulent or lacked basis, the defendant may claim damages in separate ordinary proceedings subject to the general rules set forth by the Code of Civil Procedure.
Bunker arrest claims
An arrest can be made over a vessel provided the claimant has a credit that qualifies as a maritime privilege as per the rules explained above. This credit will be considered a privileged credit in accordance with Article 846(2) of the Commercial Code.
As regards specific regulations for arresting bunkers, there are no such regulations in Chile. In theory, this could be achieved by means of the general rules set forth by the Code of Procedure regarding pre-judicial and precautionary measures, but it is not an easy exercise because of formalities and timing restrictions.
Pre-judicial precautionary measures
Chilean procedural regulations are silent on the matter of whether the arresting party is required to pursue the claim on its merits in the jurisdiction of arrest or whether it is possible to effect an arrest only to obtain security. However, when an arrest is decreed as a pre-judicial precautionary measure (i.e., a measure to secure the outcome of a subsequent substantive action), it would be possible to arrest to obtain security and then pursue proceedings on the merits elsewhere. Note that the procedural obligations established must be met, namely filing the petitioner’s complaint requesting that the decreed arrest remains in force for a period that, in principle, is 10 days but may be extended for up to a total of 30 days provided there is a sound basis for doing so. However, this is an option that has yet to be further tested in Chilean courts.
ii Court orders for sale of a vessel
In accordance with Commercial Code, the judicial sale of a vessel, whether voluntary or forced, must observe the rules and formalities set forth by the Code of Civil Procedure for the judicial sale of real estate. The procedure may take between a couple of months and one or two years depending on the debtor’s behaviour towards the proceedings. Court costs are usually minor but other costs might be generated, such as those relating to the administration of the attached property (incumbent on a depositary who has to render account for his or her administration before the pertinent court).
Chile has ratified the following conventions:
- SOLAS 1974 and its Protocols of 1978 and 1988;
- the Load Lines Convention 1966 and its Protocol of 1988;
- the COLREGs 1972;
- the STCW Convention 1978; and
- the Convention for the Suppression of Unlawful Acts of Violence Against the Safety of Maritime Navigation 1988 and its Protocol 1988.
These conventions are in force notwithstanding the domestic regulations issued by the local maritime authority.
ii Port state control
The responsibility for port state control falls on the Chilean Maritime Authority in accordance with the Navigation Law and complementary regulations, and applicable international conventions.
iii Registration and classification
Any type of vessel, whether constructed or under construction, or naval device can be registered at the following registries kept by the General Administration of the Maritime Territory and Merchant Marine:
- the Large Vessels Registry;
- the Minor Vessels Registry;
- the Vessels in Construction Registry;
- the Naval Devices Registry; and
- the Mortgage, Liens and Prohibitions Registry.
The rules relevant to the organisation and operation of registries, and the procedures, formalities and requirements of registration, are contained in the respective regulations. Note that the practice of registering vessels chartered on a bareboat basis does not occur in Chile.
In accordance with Article 15 of the Navigation Law, all large vessels (i.e., those of more than 50 GT) must be registered in the Large Vessels Registry, which is kept by the General Administration of the Maritime Territory and Merchant Marine. Minor vessels (those of 50 GT or less) are registered in the minor vessels registries that are kept by harbour masters.
iv Environmental regulation
The key legislation, rules and conventions in force in Chile for regulating air and sea pollution are as follows:
- the CLC Convention 1992 on hydrocarbon spills from vessels carrying oil in bulk as cargo;
- the CLC Convention 1969 and supplementary norms set forth by the Chilean Navigation Law on hydrocarbon spills from vessels not carrying oil in bulk as cargo or spillage of other hazardous substances;
- the OILPOL Convention (with its amendments of 1962 and 1969);
- the London Dumping Convention; and
- MARPOL (73/78).
v Collisions, salvage and wrecks
Articles 1116 et seq. of the Chilean Code of Commerce set out the main regulations applicable to collisions. The Chilean Navigation Law and the Collision Rules (1972) also apply.
Chilean collision regulations apply to damage that arises, for example, from a collision between two or more vessels or from waves caused by the movement of a vessel resulting in damage to other vessels, cargo or people on board, even if an actual collision does not occur. A ‘vessel’ is a maritime device that can move either on its own or by external means.
These rules also apply to events occurring in fluvial waters, lakes and any other navigable waterway. In addition, Chilean collision regulations apply to collision damage that arises between vessels under the same ownership or administration.
For every collision, the applicable law is that of the state in whose territorial waters the event has occurred. If the collision occurs in waters not subject to the jurisdiction of any state, the law of the country where the lawsuit is instituted will apply.
Salvage is regulated by Book 3, Title 6, Paragraph 5 of the Chilean Commercial Code (‘Services rendered to a vessel or other property in damage’).11 These rules are based on the Comité Maritime International’s draft International Convention (Montreal 1981) and the 1989 Salvage Convention.
Wreck removal is regulated under the Chilean Navigation Law. Generally speaking, the Chilean Maritime Authority can order the pertinent proprietor, owner or operator to adopt all necessary measures, at his or her own cost, to proceed with removal of the wreck within a specified term.
Chile has not signed the Hong Kong Convention; however, the IMO Guidelines on Ship Recycling (2003) are applicable.
vi Passengers’ rights
The Athens Convention is not applicable in Chile. However, passengers’ rights and the liability of the carrier are regulated by the Commercial Code (Articles 1,044 to 1,078), which is based on the Athens Convention. In addition, if a travel agent is involved, the Chilean Consumer Protection Act may also apply.
vii Seafarers’ rights
Chile has not ratified the Maritime Labour Convention 2006. These matters are regulated under a specific chapter in the Chilean Labour Code.
Recognition of salvors’ rights to limit liability
In the context of a salvage and towage operation performed by a Chilean tugboat close to the Strait of Magellan, the tugboat’s owners constituted a limitation fund in Chile in response to the damage suffered by the different parties in connection with the subsequent sinking of the towed vessel. The owners based their request on being the owners and proprietors of the tugboat.
The plaintiffs opposed the fund’s constitution, arguing – among other things – that, under Chilean law, salvors are not entitled to limit their liability.
Tonnage limitation of liability
The Chilean tonnage limitation regulations (i.e., Articles 889 to 904 of the Commercial Code) are inspired by the Brussels Convention 1957 and the Convention on the Limitation of Liability of Shipowners 1976 (the 1976 Convention).
With respect to tonnage limitation figures, the Commercial Code follows the 1976 Convention.
Under Article 889 of the Commercial Code, the owner (i.e., the ‘person or corporation, whether or not the proprietor of the vessel, who trades or dispatches it under his [or her] name’),12 can limit its liability in the following cases:
- death or personal injury and damage to property on board;
- death or personal injury caused by any person for whom the owner is responsible, whether on board or ashore (in the latter case, the acts must relate to the ship’s operation or the loading, discharging or carriage of relevant goods);
- loss of or damage to other goods, including cargo, caused by a person or people as described in point (b), grounds, places and circumstances; and
- resulting liability concerning the damage caused by a vessel to harbour works, dry docks, basins and waterways.
Besides the shipowner, other people entitled to limit their liability under the Chilean tonnage regime include:
- the shipowner’s staff;
- liability insurers;
- the operator,13 carrier, charterer and ship’s proprietor, if different from the shipowner’s staff; and
- individual employees as described in point (c), including the master and crew members, if sued.
Procedure for establishing limitation
The procedure for establishing a limitation fund in connection to general civil liability is regulated by Articles 1,210 et seq. of the Commercial Code and is mainly based on Articles 11 to 13 of Chapter III of the 1976 Convention.
On 16 January 2009, during a voyage from Punta Loyola, Argentina to Punta Arenas, Chile, the captain of a fishing vessel transporting approximately 9,500 kilograms of gold bullion reported steering problems while navigating in adverse weather conditions and sought rescue assistance. The crew were evacuated successfully by an Argentine navy helicopter, leaving the boat afloat and steaming ahead. Despite attempts by a Chilean tugboat to rescue the fishing vessel, the latter sank. The tugboat owners filed a request to constitute a limitation fund before the Valparaiso Second Civil Court for the potential liability associated with the sinking of the fishing vessel. The request was based on the company’s capacity as owner of the tugboat.
Two opposition claims were filed against the constitution of the limitation fund. In this respect, one of the grounds argued by the plaintiffs was that the owners had acted as an assistant or salvor and that this capacity – in their view – did not warrant the benefit of being able to limit their liability.
The Valparaiso Second Civil Court rejected the different opposition grounds alleged by the plaintiffs and upheld the limitation fund. As regards the specific allegation that in Chile salvors would not be entitled to limit liability, the Court held that Article 889 of the Commercial Code expressly provides that a shipowner can limit its liability without excluding its faculty for being, simultaneously, salvor of another vessel.
According to the Court, the correct manner of interpreting the laws applicable to this case involves affirming that the salvor or assistant, which is also the proprietor and shipowner of the rescuing vessel, can limit its liability. Further, the conclusion is even broader: if the salvor holds any of the capacities in respect of which the right to limit liability exists, the salvor can do so.
Subsequently, both the Valparaiso Court of Appeals and the Supreme Court upheld the Valparaiso Second Civil Court judgment.
The decision examined above is one of the most relevant substantive decisions confirmed by the Supreme Court and should provide future certainty in safeguarding salvors’ rights to limit their liability.
1 Ricardo Rozas is a partner at Jorquiera & Rozas Abogados.
3 DL 2222/78, published in the Official Gazette dated 31 May 1978.
4 Law 19971, published in the Official Gazette dated 29 September 2004.
5 Paragraph 3 of Title V of Book III.
6 AJ Broom v. Exportadora, Supreme Court of Chile, Case No. 683-98.
7 Article 975 Nos. 1 and 2 of the Chilean Code of Commerce (based on Article 1.1 of the Hamburg Rules).
8 Articles 1006 to 1008 of the Chilean Code of Commerce (based on Articles 10.1 and 10.2 of the Hamburg Rules).
9 Articles 1,044 to 1,077 of the Commercial Code.
10 Articles 1,231 et seq.
11 Articles 1128 et seq.
12 Article 882(1) of the Commercial Code.
13 According to Article 882(3) of the Commercial Code, the ‘operator’ is ‘the person who is not the owner but who executes transport and other vessel exploitation contracts according to a power of attorney granted by the former, assuming liability therefrom’.