The Shipping Law Review: Sri Lanka

Commercial overview of the shipping industry

Strategically located in the centre of the Indian Ocean, approximately 6 to 10 nautical miles off the traditional East-West maritime trade route, Sri Lanka forms an integral part of the sea-rail transportation, while being a lucrative destination for entrepot and logistic sector development. In other words, as the gateway to the Indian subcontinent, Sri Lanka sits approximately halfway between the Suez Canal and the Strait of Malacca, the key maritime choke points to the East and West, and along routes from the Strait of Hormuz, through which most of Asia's energy supplies transit.

This region sees around 70,000 ships passing through annually, carrying two-thirds of the world's oil and half of all container shipments. The close proximity to all major ports in the Indian subcontinent allows Sri Lanka to serve vessels with a significantly lower deviation time compared to other ports in the Indian Ocean.

In 2021, the merchant fleet under the Sri Lankan flag measured a total of 322 thousand deadweight tonnage (DWT), comprising oil tankers, bulk carriers, general cargo and containerships, among other types. Seagoing propelled merchant ships built of 100 gross tonnage (GT) and above, excluding inland waterway, fishing and military vessels, yachts, off-shore fixed mobile platforms and barges amounted to approximately 3639 in 20192 whereas ship repairs amounted to around 150 plus vessels per annum.3

Sri Lanka is also a provider of seafarers to the world's merchant marine fleet and has a total supply of around 21,793 seafarers. Being positioned between the two leading logistic hubs in Singapore and Dubai, Sri Lanka also handles over 25 per cent of the regional container throughput.4

The Sri Lanka Ports Authority (SLPA), constituted under the provisions of the SLPA Act,5 manages the ports in Sri Lanka6 and the Port of Colombo, which is the only deep-water commercial port in South Asia and the only hub port between Singapore and Dubai that is able to accommodate the new generation of large vessels, reported a steady growth of 4.5 per cent in container traffic and its transshipment volume accounted for more than 75 per cent of the total container quantity during the past 10 years.7

In terms of successfully handling mega ships and terminal productivity, Sri Lanka's first private container terminal operator, SAGT,8 has a berth productivity performance of 113 container moves per hour and an average of 34 container moves per hour per crane, whereas the deep-water terminal (Colombo South Terminal) has a capacity of 2.4 million twenty-foot equivalent units (TEUs) by way of equipment and manpower, and its average productivity benchmark is currently at 35 moves per hour on ultra large carrier container ships.

Sri Lanka also has an extensive feeder network, making it faster and cheaper to distribute goods within the region, and comprises 130 shipping agencies, 120 freight forwarders and more than 500 companies registered with the Merchant Shipping Secretariat, along with clearing agents.9

General overview of the legislative framework

The maritime law of Sri Lanka is founded on English maritime law. The modern law governing maritime activities in Sri Lanka is composed of both national legislation and international conventions and treaties. Maritime law was firstly introduced to Sri Lanka by the British through Section 2 of the Civil Ordinance of 1852, and the law since then has been supplemented by numerous statutes, conventions and judicial decisions.10

Sri Lanka follows a dualist approach, whereby signed international conventions require the passing of enabling statutes for incorporation into domestic law. Any convention that is not incorporated into local law by the Parliament only has persuasive authority.

National maritime legislation and arbitration includes:

  1. Merchant Shipping Act No. 52 of 1971 (as amended by Act No. 36 of 1988 and Act No. 3 of 2006);
  2. Carriage of Goods by Sea Act No. 21 of 1982;
  3. Admiralty Jurisdiction Act No. 40 of 1983 (the AJA);11
  4. Arbitration Act No. 11 of 1995 (the AA);
  5. the Marine Pollution Prevention Act (the MPA); and
  6. the Code of Civil Procedure No. 2 of 1889 (the CPC).

The following international conventions and treaties on maritime legislation and arbitration are applicable in Sri Lanka:

  1. UNCITRAL Arbitration Rules (UNCITRAL)12 – the current AA in force is based on the UNCITRAL model law;
  2. the New York Convention13 – being a member of the convention, Sri Lanka has ratified and given effect to its provisions through the current Arbitration law (i.e., AA) in force;
  3. the Hague/Visby Rules of 1968 (HVR), which are currently in force and have been given statutory force in Sri Lanka by the recent Carriage of Goods by Sea Act No. 21 of 1982;
  4. Conventions regulating pollution, such as the international convention for the prevention of pollution from ships (MARPOL), which was given statutory force in Sri Lanka by the MPA, the Convention on Civil Liability for Oil Pollution Damage 1969, and the International Oil Pollution Fund;
  5. the United Nations Convention on the Law of the Sea (UNCLOS); and
  6. the International Convention for the Safety of Life at Sea (SOLAS).

Forum and jurisdiction

i Courts

A maritime claim arising out of the breach of a contract of carriage that results in loss or damage to the contracting party can be brought before the district courts of the provinces in Sri Lanka. These courts are vested with the original jurisdiction over civil claims, including maritime cargo claims and the High Court (the HC) of Sri Lanka.

Section 2 (1) of the AJA lists maritime claims14 as follows:

any claim arising in respect of possession/ownership of a ship or to the ownership of any share therein, a mortgage of or charge on a ship/any share therein, for damage done by a ship, for loss of life/personal injury sustained, any question arising between the co-owners of a ship as to possession/employment/earnings, etc.

The AJA, read together with Section 13 (1) of the Judicature Act No. 2 of 1978, confers admiralty jurisdiction in the HC of Sri Lanka.

In addition to the determination of maritime disputes, the AJA also provides for the institution of action in relation to collisions of a vessel within the territorial waters of Sri Lanka; in both cases, the carrier should be either the owner or charterer in possession or control of the ship, while also being the beneficial owner or demise charterer of the vessel at the time that the action is brought (establishment of the personam link).

The HC of the western province is also vested with the jurisdiction over all commercial claims in excess of the value of 20 million Sri Lankan rupees – inclusive of matters related to the export or import of merchandise and services of affreightment. However, the fulfillment of the jurisdictional requirements stated by the CPC15 is required when bringing an action under this type of regime.

The limitation period for maritime claims shall depend on the terms of the contract or bill of lading (BOL) and type of claim. However, in situations where HVR apply, action is required to be brought within one year from the date on which the cause of action arose. As per the Prescription Ordinance,16 the general limitation period for damages arising out of cargo claims is two years.

ii Arbitration and ADR

The Sri Lankan AA provides for the recognition and enforcement of both local and foreign arbitral awards.

Section 33 of the AA specifically provides for an arbitral award to be recognised as binding, irrespective of the country in which it was rendered, upon application by a party to the HC of Sri Lanka under and in accordance with the provisions of the AA. Conversely, a contractual party to an arbitration agreement pursuant to which an arbitral award is made may, within one year after the expiry of 14 days of the delivery of such award, make an application to the HC for its enforcement.

The procedure to be adopted in enforcing an arbitral award delivered in Sri Lanka or outside of Sri Lanka is the same and is provided for under Section 31 of the AA:

  1. institution of action in the Commercial HC, by way of filing a petition and supporting affidavit naming all relevant parties along with all the relevant supporting documents;
  2. issue of notice of the application on the other party-respondent by the HC specifying a date for the respondent to appear and provide objections if required;
  3. fixing of a date by the HC for inquiry, once objections are filed;
  4. inquiry to be held either by the provision of oral or written submissions;
  5. case shall be fixed for judgment at the conclusion of the inquiry; and
  6. if the judgment is delivered in the petitioner's favour and no appeal is lodged against the same by the respondent, the petitioner can take steps to enforce the said judgment against the respondent upon the entering of decree as per the judgment and proceeding to executing writ in satisfaction of judgment.

In the event of an appeal, the Supreme Court may in the exercise of its appellate jurisdiction affirm, reverse or vary the order, judgment or decree of the HC, subject to the provisions of the AA, provided that the parties have not signed an exclusion agreement in which they have sought to exclude any right to appeal in relation to the award.17

Section 5 of the AA states that where a party to an arbitration agreement institutes legal proceedings in a court against the other party in respect of a matter initially agreed to be submitted for arbitration, 'the court will have no jurisdiction to hear such matter should the other party object to the same'.

However, the impact of Section 5 of the AA on Section 2 of the AJA has been determined by Sri Lankan courts18 in that Section 5 of the AA cannot have any adverse effects on Section 2(1) of the AJA in determining maritime claims. This is because the AJA is recognised as specialised legislation, and is sui generis as to the type of action or procedure.

Section 32 of the AA provides that an arbitral award made in an arbitration held in Sri Lanka may be set aside by the HC, on application made within 60 days of receipt of the award, where:

  1. the party making the application furnishes the following proof:
    • a party to the arbitration agreement was under some incapacity or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication on that question, under the law of Sri Lankan;
    • the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his or her case;
    • the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration. Provided, however, that if the decision on matters submitted to arbitration can be separated from those not submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; and
    • the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with the provisions of this Act, or, in the absence of such agreement, was not in accordance with the provisions of this Act; or
  2. where the HC finds:
    • the subject matter of the dispute is not capable of settlement by arbitration under the law of Sri Lanka; or
    • the arbitral award is in conflict with the public policy of Sri Lanka.

In the event an application is made to set aside an award, the HC may order that any money made payable by the award be brought into court or otherwise secured, pending the determination of the application.

iii Enforcement of foreign judgments and arbitral awards

The procedure to be adopted in enforcing a foreign arbitral award is provided for under Section 31 of the AA as detailed above (see Section III.ii).

The limited grounds on which the enforcement of a foreign arbitral award may be refused by Sri Lankan Courts is provided for by Section 34 of the AA. These grounds which are stated below mirror those in Article V of the New York Convention:

  1. a party to the arbitration agreement is under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it, or failing any indication as to the law to which the parties have subjected such agreement, under the law of the country where the award was made;
  2. the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator, the arbitral proceeding or was otherwise unable to present his or her case;
  3. the award deals with a dispute which was not contemplated by or did not fall within the terms of the submission to arbitration, or it contains a decision on matters beyond the scope of the submission to arbitration;
  4. the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, in the absence of such agreement, with the law of the country where arbitration took place; and
  5. the award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which, or under the law of which, that award was made.19

iv Enforcement of foreign judgments in the local jurisdiction

Sri Lanka is a signatory of the Hague Convention on the Recognition and Enforcement of Foreign Judgments. Although the Convention has not been ratified by the Sri Lankan Parliament, Sri Lanka has enacted the Reciprocal Enforcement of Judgments Ordinance No. 41 of 1937 (the REJO) where the reciprocal enforcement of foreign judgments of certain superior courts are permitted.20

In order to enforce a foreign court judgment in Sri Lanka, the judgment creditor must apply to the District Court of Colombo at any time within 12 months after the date of the judgment from these courts (or such longer period as may be allowed by the court) to have the judgment registered in court.

Sri Lankan courts may order the judgment to be registered, if it is of the opinion that in all the circumstances of the case it is just and convenient that this judgment should be enforced in Sri Lanka.

A judgment obtained from the national court under 'regular procedure' may require enforcement overseas where the judgment-debtor is a foreign party or does not have assets locally and the enforcement of such an award (delivered in Sri Lanka) in a foreign jurisdiction, may be affected without much inconvenience, as most states are a party to the New York Convention. Therefore, regulating certain maritime disputes through arbitration is relatively more advantageous.

Shipping contracts

i Shipbuilding

With the expansion of the ship building industry in Sri Lanka, the country has transformed from a traditional to a high-class ship building industry with presently 20–25 leading shipyards engaging in the manufacture of commercial and non-commercial vessels.21 The Colombo Dockyard PLC, Baff Polymech Pvt Ltd, Neil Fernando and Co Pvt Ltd are a few leading players in the industry striving to add new dimensions to the industry, such as building eco-friendly and electric power bulk carriers.22

The laws and regulations applicable to a ship building contract are dependent on several factors such as the type of vessel, the capacity of the vessel, regional zone and country specific requirements. Contracts for large vessels with a capacity of more than 500 GT are generally covered by International Conventions such as SOLAS 1974, MARPOL 1973, Load Line23 1966 and COLREG24 1972. In addition, the Boats Ordinance 1900 (as amended), Master Attendants Ordinance of 1865, Launches Ordinance of 1907 and the Merchant Shipping Act 1971 are applicable national legislation.

Despite such laws and regulations in place, there is a lacuna in respect of legislation for licensing and registration of vessels especially for the determination of seaworthiness of vessels. Although Code of Safety for Small Commercial Vessels, 2017(the SCV Code) addresses this aspect to a certain level, a more comprehensive legal regime is warranted for in this regard.25

Generally, the title of a vessel is transferred to a purchaser of a vessel upon completion of the construction of a vessel. As the construction and sale of a vessel are carried out in stages, the chances of disputes arising in this regard are minimal. However, disputes in respect of delay in delivery of vessels are a more common occurrence and in practice all disputes in relation to shipbuilding contracts are resorted to arbitration.

ii Contracts of carriage

Domestic contracts of carriage in Sri Lanka are generally governed by law of contract and no specialised local legislations are in place for such contracts. However, when the contracting parties are in different countries, parties will subject themselves to international laws and conventions such as Hague Rules and HVR and Rotterdam Rules to evade conflict of laws. In support of the harmonisation and uniformity of international trade by sea, Sri Lanka has ratified Hague Rules 1924 and HVR of 1968. HVR have been adopted in Sri Lanka through the local statue of Carriage of Sea Act, extending its applicability to carriage of goods in ships from any port of Sri Lanka to any other port in or outside Sri Lanka where expressly or impliedly providing for an issue of a BOL or a similar document of title. Accordingly, duties and liabilities of the parties will be determined as per HVR. It must be noted that Sri Lanka has not ratified the Hamburg rules, and the Rotterdam Rules that give effect to multimodal transport.

In the event of any default of the shipper, the right of a lien can be exercised by the carrier in terms of the conditions of the BOL. Additionally, provisions of the common law also vest a party with the right to a lien over goods,26 which is applicable only on goods that are owned by the party against whom the lien is to be exercised and not over third-party property.

iii Cargo claims

Cargo claims can be instituted by an aggrieved consignee enforcing the contractual terms or obligations set out in the charter party contract or the BOL against the carrier, ship owner or its agent. Generally, the terms of the contract will set out the basic obligations covered under Hague/HVR and the claim has to be instituted invoking the applicable law and jurisdiction agreed by the parties under the charter party or the BOL. If Sri Lankan jurisdiction is invoked by the aggrieved parties, a regular action can be founded for breach of contract resulting in loss and damage to the contracting parties in a competent court of jurisdiction in Sri Lanka (i.e., in the relevant district court if the value of the claim is less than Sri Lankan rupees 20,000,000 or High Court of the western province (exercising civil jurisdiction) if the value of the claim is more than Sri Lankan rupees 20,000,0000). In addition to this, cargo claims will also qualify as a maritime claim under the AJA providing the option for a cargo claimant to institute in rem proceedings against the carrier in terms of Section 2(1) for any loss or damage caused to goods or to any dispute arising out of any agreement into carriage of goods in a ship.27

A carrier's liability is limited in the instances set out under Article IV of the HVR and the Carriage of Goods Act 1982 provides that it shall not be implied in any contract of carriage an absolute warranty by the carrier to provide a seaworthy ship. It must also be noted that following the English law on which the Sri Lankan maritime law is firmly founded, demise clauses and Himalaya clauses are generally included in BOL as a practice in Sri Lanka.

iv Limitation of liability

The Convention on Limitation of Liability for Maritime Claims 1976 is not enforced in Sri Lanka and the provisions of the MPA do not apply to vessels under ownership of the armed forces. Except in the case of a prosecution or claim by a regulatory authority, a Sri Lankan court will uphold or otherwise take cognisance of limitation of liability clauses, subject to the unfair contract terms legislation of the law governing the dispute.

Remedies

i Ship arrest

Ship arrests in Sri Lanka (action in rem proceedings) are governed by the AJA in conjunction with the High Court (Admiralty Jurisdiction) Rules 1991 (the AJR). Section 2(1) of the AJA lists the maritime claims upon which such in rem proceedings can be instituted. The High Court of Colombo is exclusively vested with the admiralty jurisdiction over Sri Lankan territorial waters and in the terms of Section 7 (1) of the AJA. The court is empowered to issue a warrant for the arrest and detention of the vessel upon satisfaction that such vessel will be removed from the jurisdiction of the court before the plaintiff's claim is satisfied.

In order to institute an action in rem it is imperative to establish the personam link in terms of Section 3(4) of AJA where the plaintiff is required to establish the relevant person in respect of the vessel when the cause of action arose (the owner, charterer, in possession or control of the vessel); and the beneficial owner or charterer (charter by demise) of the vessel at the time when the action was instituted.

Sister ship arrests can be carried out in terms of Section 3(4) (b) (ii) of the AJA provided the relevant person of the vessel in question and the sister ship is the same. In the recent case of X-Press Kohima,28 the arrest of MV X-Press Kohima was carried out to recover the loss and damage caused to the cargo on board of MV X-Press Pearl on the basis that Sea Consortium Private Limited was the relevant person of both vessels in terms of Section 3(4)(b) of AJA.

An action in rem is instituted upon the filing of an affidavit to lead warrant together with supporting documents and can be supported ex parte for the issuing of a Warrant of Arrest and Writ of Summons. Once the warrant has been issued, the warrant and the writ must be served on the master of the vessel. Generally, service of the warrant and the writ is carried out by the marshal and an agent of the plaintiff with the assistance of the relevant port control and the Sri Lankan Navy, when necessary. Once the warrant of arrest has been executed the vessel will remain in the custody of the marshal on behalf of the court. The writ of summons commands the owner of the vessel to make an appearance in court within two weeks from service of summons. In the event of default of appearance, the matter will be fixed for ex parte trial and judgment.

In an interparty action, a counter claim in respect of loss and damage incurred due to the arrest of the vessel may be sought by the defendant owners of the vessel. Particularly, in respect of sister ship arrests, counter claims for wrongful arrest may also be sought where the defendant owners will be bound to demonstrate mala fides or gross negligence, which implies malice.29

In terms of the AJA, defendant owner can make an application to court to release the vessel upon furnishing bail, guarantee or any other security to the satisfaction of the plaintiff.30 This would generally be by way of a bank guarantee or in special circumstances by a LoU of a P&I Club. In any event, the AJR has conferred discretion on the admiralty judge to release a vessel from arrest if the guarantee or the security issued is to the satisfaction of the judge for the payment of the sum claimed or for the appraised value of the vessel arrested.31

ii Court orders for sale of a vessel

In the event that there is no appearance on behalf of the defendant shipowners, an ex parte judgment can be obtained by the plaintiff. Thereafter, the plaintiff may make an application to the court in terms of Rule124 of the AJR to move for an appraisement and sale of the vessel by way of public auction or sale by private treaty.

In the instance of a sale of the vessel by public auction, once the order is delivered to appraise and sell the vessel, the marshal is required to carry out an appraisement of the vessel and report the same to court. Such report is subject to objection by the claimant in the event that the valuation is unreasonable in the claimant's view. Thereafter the court will, in conjunction with the marshal, set a date for the auction and publish details of the sale in the national newspapers and the Merchant Shipping Secretariat website.

The auction is generally held at the court premises and the registered bidders are required to attend the auction upon making a deposit of generally US$100,000 – in terms of the auction notice. The successful bidder is given 14 days from the date of auction to pay the bid price to complete the sale. Thereafter, the bill of sale and the proforma disbursement account (PDA) will be issued to the new purchaser. The proceeds of the sale will thereafter be credited to a consolidated account of the court and the monies will be released to the claimant as per the judgment and decree. In the event that there are a number of judgment creditors against a defendant vessel, the monies will be released pursuant to a priority inquiry being held to that effect.

Regulation

i Safety

Sri Lanka is a party to the International Maritime Organization Conventions for the Safety of Life at Sea (1974) and Convention on Load Lines (1966) (the LLC).

SOLAS (ratified by Sri Lanka in 1978) and the LLC became part of Sri Lankan law by the enactment of the Merchant Shipping Act (the MSA). Sections 139 and 164 of the MSA provides a non-exhaustive list of regulations that the Minister of Ports and Shipping is empowered to issue to ensure better safety at sea and for implementation of the standards set out in the SOLAS and LLC.

The Merchant Shipping Secretariat (the MSS) is the main body responsible for the implementation and administration of the rules and regulations referred to above that deal with the implementation of international conventions, which, inter alia, includes ensuring the safety of life and property at sea, the stability, loading and ballast of ships, conditions of assignment of freeboards and the investigation of shipping casualties.32

Further laws and regulations associated with the safety at sea have been provided by the enactment of the Piracy Act No. 9 of 2001 (suppression of piracy) and Suppression of Unlawful Acts against the Safety of Maritime Navigation No. 2 of 2000 (implemented into domestic law the Convention for the Suppression of Unlawful Acts against the Safety of Maritime Navigation 1988).

ii Port state control

Sri Lanka was a party to the Memorandum of Understanding on Port State Control for the Indian Ocean Region (the MOU) in 1998. Accordingly, the MSS, which functions as the country's maritime authority, has the role of inspecting vessels to ascertain if they are in compliance with Sri Lankan and international safety regulations (flag state and port state control).

The Merchant Shipping Notice, MSN 07/2016(revised) dated 27 May 201633 provides:

The MSS is committed to have ships under Sri Lankan flag with less port state control detentions and is fully supportive of the objective of the Port State control Process in eliminating sub-standard shipping when applied in a fair and equitable manner.

iii Registration and classification

The procedure pertaining to the registration of a ship in Sri Lanka is laid down under Part III of the MSA. Applications for the registration of a ship should be handed over to the registrar of ships at the MSS.

Section 30 of the MSA provides that a vessel will not be deemed to be a Sri Lankan ship unless it is owned wholly by a person who is a citizen of Sri Lanka, any government sponsored shipping company or corporation or any corporate as may be determined by the minister. Every ship that comes under Section 30 unless exempted should be registered34 with the MSS. Any ship that does not exceed 15 tonnes or any licensed boat need not be registered.35

Sections 34 to 46 of the MSS provides the prerequisites that need to be adhered to or satisfied before the registrar of ships grants a certificate of registry in respect of ships that have been entered into the register book.36

The port at which a Sri Lankan ship is registered shall be deemed to be the port of registry of that ship.37 In the event a Sri Lankan ship, inter alia, has a change in master38 or owner,39 transmission of property in a ship on bankruptcy or death of the registered owner,40 if a mortgage is taken (as security for a loan41) or there is any transaction that affects a mortgaged ship this should be recorded in the registry book in accordance with the procedure provided in the MSA. It should be noted that a maritime lien takes priority over mortgage42 or other preferential rights associated with a registered ship.

iv Environmental regulation

The Marine Pollution Prevention Act No. 59 of 1981, (as amended) was enacted in Sri Lanka to prevent, reduce and control the pollution in Sri Lankan waters and to give effect to international conventions on the prevention of pollution of the sea. This Act incorporates into domestic legislation the provisions of MARPOL.43

The Marine Environment Protection Authority (the MEPA) established under the MPA is the statutory authority vested with the responsibility to prevent, control and manage pollution of Sri Lanka's marine environment.

Sri Lanka is also a signatory to the following international conventions relating to marine pollution:

  1. MARPOL (Annex I–VI) or MARPOL 73/78;
  2. the International Convention on Oil Pollution Preparedness, Response and Co-operation of 1990 (the OPRC);
  3. the International Convention on Civil Liability for Bunker Oil Pollution Damage of 2001 – this Convention was adopted to ensure that adequate, prompt and effective compensation is available to persons who suffer damage caused by spills of oil when carried as fuel in ships' bunkers (not in force);
  4. the International Convention on the Control of Harmful Anti-Fouling Systems on Ships;
  5. the Convention on Civil Liability for Oil Pollution Damage 1969 (in force in Sri Lanka); and
  6. the protocol laid down by the International Oil Pollution Fund in force in Sri Lanka).

The incident involving the MT LMS Laxapana was one of the first cases filed in which the jurisdiction of the MPA was invoked in relation to an oil spillage.

The incident involving the MV X-Press Pearl where the vessel caught fire in the outer port limits off the Port of Colombo on or about 21 May 2021 completely destroyed the vessel and its cargo and was reduced to a wreck. The vessel subsequently sank. Such events led to the worst marine environmental incident in Sri Lanka's recorded marine history. Similarly, the fire that erupted on board the MT New Diamond caused severe damage or pollution of the surrounding environment.

v Collisions, salvage and wrecks

The Director General of MSS (under the powers vested in him under the MSA44), together with the SLPA, issued a joint Circular (dated 23 March 2016) laying down the procedure to be followed in safety investigations that involve marine casualties and incidents. This procedure has to be in line with Casualty Investigation Code 2008.

AJA provides for determination of maritime disputes which includes matters relating to collisions within the territorial waters of Sri Lanka and for the prosecution of claims in the nature of salvage, including towage of vessels under distress.

The SLPA in relation to the owning of port land and regulating all activities in relation to matters occurring within a port is empowered to carry out the removal of wrecks which obstruct or otherwise pose a danger to navigation in the port or outer port limits. The MEPA and the Coast Conservation Authority are the other regulatory bodies that act with the SLPA in matters of wreck removal.

The director of MSS will be the principal receiver for wrecks in Sri Lanka and is empowered to direct and supervise all matters relating to receivers, wreck and salvage.45

Part VII of the MSA provides for the safety of navigation'. Sections 186 to 192 provide regulations relating to collisions that must be obeyed by all owners and masters of Sri Lankan ships.

While provisions of the 2007 Nairobi Convention on Wreck Removal are not enforced in Sri Lanka, Part IX of the MSA on wreck and salvage provides for provisions to be observed in the removal of a wreck. Notably, disputes relating to salvage are summarily determined by the HC and a limited fund cannot be enforced for wreck removal in Sri Lanka.

vi Passengers' rights

Passenger claims are governed and determined by either of the following:

  1. contractual liability, founded on a breach of contractual obligation by either the passenger or transporter, resulting in financial loss; or
  2. tortious liability.

Such actions can be founded by way of regular actions before a Sri Lankan court, subject to satisfaction of the jurisdictional requirements as set out hereinafter. A passenger claim against a vessel could also be tantamount to a 'maritime claim' listed under Section 2(1) of the AJA where the aggrieved claimant may seek arrest of the vessel as security for the claim.46

vii Seafarers' rights

Although the Maritime Labour Convention, 2006 (MLC) has been ratified, no domestic legislation has been passed enforcing the MLC in Sri Lanka. However, prior to Sri Lanka ratifying the MLC, the MSS in 2010 issued a notice47 stipulating:

…all parties concerned are requested to commence implementation procedure since the recruiting agents and ship owners/managers may have to comply with it irrespective of the ratification of the MLC 2006 by SL.48

In a landmark Sri Lankan case involving a subrogated claim in relation to unpaid crew wages on board, the MY Kalizma was filed for the very first time under the amendments to the MLC mandating settlement of unpaid crew wages by underwriters.

The International Standards and Recommended Practices for a Safety Investigation into a Marine Casualty or Marine Incident (Casualty Investigation Code 2008) have been affected in Sri Lanka by MSS Notice, MSN 06/2016.49

Sri Lanka also recognises the guidelines developed by the joint IMO/International Labour Organization (ILO) working group in 2006 on the fair treatment of seafarers in the event of a maritime accident and, accordingly, the fair treatment of seafarers during the investigation process following a maritime accident is identified as an international obligation of Sri Lanka.50

Although these guidelines do not seek to interfere with the state's domestic, criminal and civil law processes, the application of the same was comprehensively discussed during the proceedings of the MV X-Press Pearl, in which the continued detention of the seafarers pending the resolution of a financial dispute was challenged.

Furthermore, in the event that seafarers are detained subsequent to a maritime accident, they are afforded the protection of their fundamental rights that are recognised under the 1978 Constitution of Sri Lanka (all fundamental rights that are protected under the Constitution are available to the citizens of Sri Lanka; however, only some are available to all persons within the territory of Sri Lanka irrespective of nationality).

Outlook

Sri Lanka's growing capacity in offshore engineering together with its growing reputation as a marine engineering hub in the South Asian region has added to the country's reputation as an emerging logistics hub.

With the geo-strategic nature of Sri Lanka, the maritime industry has recently developed rapidly, warranting the implementation of a stable maritime legal framework. Nevertheless, with the recent incidents of MT New Diamond and MV X-Press Pearl, certain lacunas in the legal framework were identified, especially in respect of marine pollution. Taking these into consideration, the Minister of Ports and Shipping together with the Minister of Justice appointed a committee in November 2021 to formulate a report consisting of recommendations to the Sri Lankan maritime legal framework with a view to bridging the gaps in the local legislation in line with international maritime legislation.

There are also a number of projects51 that are underway to expand and develop several ports in Sri Lanka. These aim to facilitate the maritime industry and improve the cargo management system in order to provide electronic payment and delivery facilities such as the construction of the east container terminal of the Port of Colombo, the construction of a logistical centre and a multimodal transport hub to maximise the use of ports and terminals in Sri Lanka.

Footnotes

1 Nadine Puvimanasinghe is a senior associate, and Sachitra Abeywardane and Gayani Rambukwella are associates at D L & F De Saram.

5 SL Ports Authority Act No. 51 of 1979 (as amended).

6 Port of Colombo, Galle, Hambatota Kankasanturai, Point Pedro, Oluvil, Trincomalee.

8 South Asia Gateway Terminals.

12 United Nations Commission on International Trade Law.

13 Convention on the recognition and enforcement of foreign arbitral awards of 1958.

14 Admiralty Jurisdiction Act No 40 of 1983; http://www.dgshipping.gov.lk/web/images/pdf/rules/annex08.pdf.

15 Such as the location of the registered office of the carrier to be within, or the cause of action to be within, the jurisdictional limits of the court or the existence of a valid contract.

16 Prescription Ordinance No. 22 of 1871 and No. 2 of 1889, as amended by Act No. 5 of 2016.

17 ibid., No. 10.

18 Colombo Commercial Fertiliser Limited v. Motor Vessel (SCI Mumbai) CA PHC APN 47/2013 and MV Thermopylae Sierra, Action in Rem No. 10/2010.

19 ibid., No. 10.

20 Accordingly, judgments of superior courts in the United Kingdom, Mauritius, Singapore, Uganda, Malaysia, Australia, New Zealand and Western Samoa can be enforced in Sri Lanka.

23 International Convention on Load Lines(LL), 1966.

24 Convention on the International Regulations for Preventing Collisions at Sea.

25 Development of Regulatory Framework for the Boating Industry in Sri Lanka, Initial report and Outline of Regulatory Framework, March 2019, Lloyds Register.

26 Common law lien.

27 Section 2(1) (g), (h) of the AJA.

28 Actions in rem 19/2021.

29 MV Kalyani v. Mutiara Shipping Co (1998) 2 SLR 105 (where the court followed The 'Evangelimos' ).

30 Section 7(2)(b) of the AJA.

31 Rule 37(1) (c).

34 MSA Section 31.

35 MSA Section 32.

36 MSA Sections 33 and 47.

37 MSA Section 43.

38 MSA Section 53.

39 MSA Section 54.

40 MSA Section 59.

41 MSA Sections 63 to 76.

42 MSA Section 84.

43 The international Comparative Legal Guide to: Shipping Law 2019 Jivan Goonetilleke Savantha de Saram. https://www.ssek.com/images/publication_file/1755/international-comparative-legal-guide-to-shipping-law-2019.pdf.

44 The international Comparative Legal Guide to: Shipping Law 2019 Jivan Goonetilleke Savantha de Saram. https://www.ssek.com/images/publication_file/1755/international-comparative-legal-guide-to-shipping-law-2019.pdf.

45 MSA 225.

46 The international Comparative Legal Guide to: Shipping Law 2019 Jivan Goonetilleke Savantha de Saram. https://www.ssek.com/images/publication_file/1755/international-comparative-legal-guide-to-shipping-law-2019.pdf.

47 MSN 15/2010.

49 ibid.

50 Adoption of guidelines on the Fair Treatment of Seafarers in the Event of a Maritime Accident; https://comitemaritime.org/work/fair-treatment-of-seafarers/.

51 For example, the liberalisation of the multi-country consolidation (MCC), the development of a logistic distribution centre in the South Harbour in collaboration with the China Merchants (CM) Port and the pilot project on implementing a warehouse management system (WMS).

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