Guilty without guilt : the status of shipping agents in Ukraine

August 31, 2021 · Publications

The status of a shipping agent in Ukraine does not correspond to the «as agent only» principle. Within the framework of the agreement on the interaction of the parties during ship agency services, the shipping agent is endowed with additional legal personality.

The specifics of shipping agency services are defined by Chapter 5 of the Merchant Shipping Code (MSC) of Ukraine (Articles 116-119). Based on the content of part 1 of article 116 of MSC of Ukraine, the shipping agent is the permanent representative of the shipowner. From the analysis of the provisions of Part 3 of Article 116, paragraph «c» of Part 1 of Article 118 of the MSC of Ukraine, it can be concluded that the shipping agent usually acts on behalf of the shipowner in relations with third parties, which corresponds to the long-known international principle of shipping «as agent only».

However, is the agent really only an intermediary? Can the shipping agent act on his own behalf in relations with third parties, be responsible for the actions of his principal, or be a party in the litigation related to the payment of port fees? These issues will be discussed below.

The specific agent`s status according to the agreement

For at least the last five years, the relations between the shipping agent and the Ukrainian Sea Ports Authority (USPA) regarding the payment of port dues and other services provided to ships by the Administration have been regulated by a standard «agreement on the interaction of the parties during ship agency services», which was developed by the USPA itself. This agreement is periodically renegotiated on almost identical terms and, at the same time, is essentially an accession agreement.

We shall note that the legislation does not establish any specific requirements for the terms of such agreements, in connection with which it becomes necessary to analyze the design features of it.

In accordance with the terms of the agreement established by the USPA, shipping agents are endowed with a certain independent «legal personality», according to which their rights / obligations / actions / expenses are allocated from the rights / obligations / actions / expenses of the shipowner, which is not typical for the «usual» relations of the representation according to the provisions of the Civil (CC) and the Commercial (CC) codes of Ukraine.

These features include the condition by virtue of which shipping agents are always financially responsible to the USPA for the corresponding payments.

Moreover, the shipping agent is also the direct payer of port dues and services.

At the same time, it is quite obvious that the shipowner will be liable for the consequences of any actions of the shipping agent, as for his own (clause «c» of Part 1 of Article 118 of the MSC of Ukraine) only if the agent (1) acted within the scope of the powers granted to him and (2) entered into an agreement with third parties on behalf of the shipowner, and not on his own.

That has a led to a situation in which:

  • the shipping agent is defined as the permanent representative of the shipowner;
  • in relations with third parties, the shipping agent often acts on behalf of the shipowner;
  • the agency agreement establishes specific signs that are alien to the «usual» relations of the representation provided for by the Civil and Commercial codes of Ukraine. In particular, the agency agreements confer additional rights and obligations on the shipping agent.
  • shipping agents are a proper party in disputes with the USPA, which relate to the payment by agents of port dues and other services that were provided by the USPA to agency ships (the ruling of the Supreme Court as part of the panel of judges of the Cassation Economic Court of April 13, 2021 in the case № 916/1936/20);
  • agency agreements are service agreements, where shipping agents act on their own behalf as customers / recipients of the relevant services (the ruling of the Supreme Court as part of the panel of judges of the Cassation Economic Court of February 26, 2020 in case № 910/2741/19);
  • it is shipping agents, and not shipowners, that have obligations to pay for services that are provided in accordance with the interaction agreement (the ruling of the Supreme Court as part of the panel of judges of the Cassation Economic Court of July 24, 2020 in case № 908/1489/19);
  • the agreement on the interaction is taken into account by the administrative courts as the evidence that confirms the proper status of the agent as a plaintiff in those disputes that did not directly relate to the fulfillment of the terms of the agreement on the interaction (the determination of the Supreme Administrative Court of Ukraine dated June 22, 2017 in case № 815/6477/16).

Due to such peculiarities of the shipping agents` status, there appears a field for manipulation by the USPA in litigations regarding the payment of port dues, as well as other services under the agreement. In such disputes, the position of the USPA is quite simple: agents with the status of defendants in the case are the proper defendants, since they are independent payers of port charges, which follows from the terms of the agreement. However, shipping agents with the status of plaintiffs are an improper party to the case, since, according to the legislation, they are «exclusively mediators» and act without the corresponding assignment of the shipowner in the court.

This behavior is confirmed by numerous examples of judicial practice, when the USPA initiates legal disputes against shipping agents regarding the execution of an agreement with the respect to the collection of payments for services and port dues. For example, cases № 916/1667/19 (the judgement of the Commercial Court of Odessa region of September 9, 2020); № 916/3837/19 (the judgement of the Commercial Court of Odessa region of August 3, 2020); № 908/1489/19 (the ruling of the Supreme Court as part of the panel of judges of the Cassation Economic Court dated July 24, 2020).

What do the courts say?

The legal nature of the agreements on the interaction of the parties during ship agency services is often analyzed by national courts, incl. by the Supreme Court.

Thus, the courts have provided a sufficient number of law-enforcement guidelines regarding the determination of the legal status of agents, namely:

It can be seen from the above court decisions that the shipping agent is an independent participant in relations under the agreement introduced by the USPA.

At the same time, despite this practice, the USPA ceases to turn to all kinds of methods of proving the opposite.

For example, in one of the recent cases in a dispute between the shipping agent and the USPA on the return to the agent of the overpaid wet charges, administrative and sanitary fees, the USPA filed a motion to request from the shipping agent evidences of the agent`s powers to collect such amounts.

The court, in turn, refused to satisfy such a motion and noted that «... the documents that the party is seeking to claim are evidence supporting the claim, and the provision of such evidence is the right of the plaintiff (the shipping agent)».

As a result, first instance court concluded that the shipping agent was a proper plaintiff in the case and satisfied his claims (the ruling of the Supreme Court as a member of the panel of judges of the Cassation Economic Court dated April 13, 2021 in case № 916/1936/20).

International experience of the status of the shipping agent

It should be noted that the imposition of certain financial obligations on shipping agents is not unique to the international shipping experience.

In particular, General Director of the Federation of National Associations of Ship Brokers and Agents (FONASBA) noted in his report «The obligations of ship agents - an international view» dated September 29, 2016 the following:

«As agent only» - provided that it is clearly formulated and properly applied, the rule has stood the test of time and is generally accepted, both in English law and in other jurisdictions.

Its status is threatened by a number of recent changes ... Port and other authorities are increasingly trying to force ship agents to take additional obligations on behalf of the persons they represent in order to prevent default».

What do we have and what to strive for?

As we can see, at present, there is a situation when shipping agents, despite the legally established model of legal status, are separately obliged under the agreements introduced by the USPA to act in relations with the USPA on their own behalf, bear personal responsibility, and are also endowed with additional rights and obligations.

Considering the inevitability of disputes between the USPA and shipping agents within the framework of the agreement, we see the following ways out.

First, the USPA will take into account the established practice of the Supreme Court and depart from the position that the shipping agent is an improper plaintiff in further litigation on the fulfillment of the agency agreement.

Second, the USPA will revise its agency agreement and introduce in relations with shipping agents such a version of the agreement, according to which the agent would act exclusively as an intermediary in accordance with the provisions of the MSC of Ukraine.

Team