Court confirms Buenos Aires lacks jurisdiction to address issues involving upriver Parana terminals
Introduction
Calling upriver to load grains and by-products exposes the vessels to either drama or tragedy. It takes around 40 hours of pilotage to reach the terminals located up the Parana River from the pilot station in Recalada at the entrance of the River Plate. The usual risks associated with navigation in the Parana River (ie, sand banks and narrow channels) are nothing when compared with other non-navigational related issues. A vessel grounded would be drama, but a vessel arrested after completing loading and over-drafted upriver due to a sudden reduction in the water level could be the first chapter of a tragedy.
In this context, a federal court of appeal confirmed that Buenos Aires lacks jurisdiction to address issues involving upriver Parana terminals.
The case under analysis pertains to a terminal located at Timbues (460 kilometres along the Parana River). After the holds’ approval at anchorage, the vessel proceeded to berth. However, the holds were then rejected by local surveyors due to condensation inside them caused by the dew resulting from the weather conditions at the time of berthing.
Eventually, the terminal ordered the vessel to vacate the berth, and the vessel was forced to appoint mooring boats and harbour pilots needed to return to the anchorage. At the same time, the terminal claimed damages for the alleged unproductive hours they experienced. The based on the terminal’s terms and conditions unilaterally impose a costly fine per hour for any delay, not just during loading operation but even before berthing.
The terminal brought the proceedings in the city of Buenos Aires (approximately 400 kilometres from the terminal), seeking the arrest of the vessel, but surprisingly, it omitted to place the owners on notice of the alleged claim. However, the terminal relied on the fact that the owners had appointed a local agency that provided port services to trigger its jurisdiction as the agency had a branch in Buenos Aires. The owners, in turn, immediately sought to avoid any attempt to arrest the vessel by instructing the master to submit a surety bond issued by a local insurer. Subsequently, the terminal brought into question the master’s capacity to issue the power of attorney, claiming that it was the local agency intervening that represented the vessel’s interest and not the master. Hence, the terminal argued that the master lacked the capacity to appear in court.
The judge had decided that the master of a foreign flag vessel can be a plaintiff or defendant in any claim involving the vessel’s owner and not the agency (for further details see, “Aye, aye, captain! Court clarifies master’s capacity to appear in proceedings“).
Once the position of the master was clarified and accepted as a party in the proceeding, the next step was to address the owners’ challenge to the jurisdiction of the Buenos Aires court, which had conveniently been triggered by the terminal, presumably to weaken the owners’ defence caused by the distance. On appeal, the federal court of appeal confirmed the judge’s decision that Buenos Aires lacked jurisdiction, and highlighted the rule set out in article 5.3 of the Civil and Commercial Procedural Code which establishes that, in matters relating to contracts, the proceeding may be brought in the court for the place of performance of the obligation in question (ie, the Federal Court of Rosario, which has jurisdiction over the port of San Lorenzo, San Martin and Timbues, where the terminal is located).
While all shipping related matters can only be heard at federal courts, within the Argentine federal system there are district courts in each of the provinces. Specifically, there are two federal courts in Rosario with jurisdiction over more than 40 port terminals located nearby.
There are still open questions which will have to be addressed at the Federal Court of Rosario:
- whether the terminal’s terms and conditions which impose fines for delays before berthing are abusive;
- whether those terms and conditions are applicable to head owners who do not have any contractual link either with the shippers or the terminal; and
- whether the arrest based on alleged unproductivity is wrongful.
