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ASSIGNMENT 2 INTERNATIONAL TRADE LAW (2).pdf
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GLUEK3033 INTERNATIONAL TRADE LAW
SEMESTER 1 SESSION 2024/2025 (A241)
GROUP A
GROUP ASSIGNMENT 2:
QUESTION 3 - PROBLEMATIC QUESTION
PREPARED FOR:
MR. AHMAD NASYRAN BIN AZRAE
PREPARED BY:
GROUP 7
NO. NAME MATRIC NUMBER
1 LAHVANYA A/P RAJENDRA 297246
2 MORISHA REANNE A/P MARTIN LUTHER 297406
3 MATHU MITHA A/P K BALACHANDRAN 299948
4 SHUWETA PERUMAL 300975
5 ROSHINI A/P SELLAPPAH 301018
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10 TABLE OF CONTENT
1.0 INTRODUCTION................................................................................................................... 2
2.0 ISSUES......................................................................................................................................3
ISSUE 1..................................................................................................................................... 3
ISSUE 2..................................................................................................................................... 5
ISSUE 3..................................................................................................................................... 7
9 3.0 CONCLUSION........................................................................................................................ 9
4.0 REFERENCES.......................................................................................................................10
1
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1.0 INTRODUCTION
Marine Insurance in Malaysia is legislated by the “Marine Insurance Act (MIA) 1906” by virtue
1 of “Section 5(1) of Civil Law Act 1956”. According to “Section 1 of MIA 1906”, a ‘contract of
marine’ insurance is an agreement by the insurer to pay the assured an agreed amount for the loss
or damage that arises out of a marine adventure, in consideration for a premium. “Section 3(2) of
3 the same act in the case of exposure of insurable property to maritime perils defines marine
adventure as navigation or transportation from one place to another. ‘Maritime perils’ means any
events of sea navigation, including natural conditions, fire, war, piracy, theft, capturing,
detention, wrongful act committed by the ship’s personnel and other risks mentioned in the
policy.
Besides, Marine Insurance has a direct connection with what's named as the “Contract of
Affreightment”, also known as the legal rules that guard the carriage of goods by sea. This
11 contract outlines the terms and conditions between the ship-owner and the cargo owner and is
evidenced in two primary forms, the “Charter-Party” and the “Bill of Lading”. The Charter Party
2 is a contract for hire of the entire ship or part of it for the carriage of cargo while the Bill of
Lading is a receipt for the goods, the contract acknowledgement and shipment’s title document.
Marine Insurance gives protection for goods from the perils and losses which may be
experienced in sea transportation. It protects the insured by allowing them to recuperate their
losses or costs due to dangers for which the vessel has been insured such as storms, shipwrecks,
or other sea perils. This type of insurance is very important in trade especially in the international
market since one may never expect the other to encounter problems that make business
17 impossible. Thus, marine insurance plays a significant role in providing the financial guarantee
and the Contract of Affreightment with the legal certainty to make the process of transportation
smooth and in case, with possible eventualities or creating legal cases of loss.
2
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2.0 ISSUES
ISSUE 1
Whether Syarikat Otomobil Berhad (SOB), as the insured, can claim against US Assurance Co.
(UAC), the international marine insurer, for the damaged goods caused by the fire?
According to “Section 1 of the MIA 1906”, the definition of marine insurance is defined as a
contract in which if the insured experienced losses associated with marine adventure, the insurer
has to indemnify them. Usually, every lawful marine adventure is subjected to marine insurance.
The law applicable in this case is the liability of the insurer is explained in “Section 55(1)” of the
said act, where it is stated that insurers would only be liable for losses that were caused by
insured maritime perils. To reiterate, the term maritime perils refers to the risks associated with
sea navigation, such as fire, war, robbers, rovers, pirates, princes and peoples being captured,
seized, restrained, and imprisoned, barratry, jettisons and other comparable perils. So, when the
16 insured faced any of the risks stated above during the voyage, the insurer would be held liable to
compensate them.
The liability of the insurer is illustrated by the case of “Leyland Shipping Co v Norwich Union
14 Fire Insurance Society (The Ikaria)”1 where the ship was torpedoed by a German submarine
and was transported to Le Havre, France, for repairs. Furthermore, the ship absorbed a lot of
water and suffered significant damage. However, based on the fear of sinking and interfering
with Red Cross operations in the deep-water harbor, the ship was moved from one wharf to
another. Apparently, the ship broke apart and was lost, and the conditions of the sea which was
rough but not very bad was blamed for it. The question in this case is were the owners insured
for the risks of the sea or were they not covered for the war action? The insurers were not held
liable as it was believed that torpedoing was the real reason the ship sank. The judgement is
determined by Lord Shaw, where he claimed that when multiple factors or causes exist
1 concurrently and only one can be picked, the matter is determined as one of fact, and the one
with the qualities of reality, predominance, and efficiency is chosen. As stated in the case,
although the maritime perils could be one of the factors for the ship to sink, the main cause for
the ship to sink is the torpedoing action by the Germans, which badly damaged the ship. As only
1
[1918] AC 350
3
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loss or damages caused by maritime perils would be considered to insure for the ship, the insurer
was not held liable.
Applying the law to the current circumstances, SOB, an automobile company, has insured 1000
units of the “Karan V.I” model to Vietnam with an international marine insurance company,
UAC. Unfortunately, during the voyage, the ship carrying the goods was caught by fire, causing
significant damage to most of its cargoes including the goods shipped by SOB. Since the cause
of the damage during the voyage is fire, it is classified as one of the maritime perils and would be
covered under the liability of the insurer. The current situation opposes the judgement of the case
12 stated above, in which the court held that the insurers would not be held liable for the losses
caused. Contrasting to the illustrated case, the circumstances in this case shows clear indication
that the damage to the goods was genuinely due to one of the maritime perils, which is fire and
no other external factors. Thus, SOB can take legal action against UAC and claim for the
damages they suffered because of the fire. Yet they can only claim their actual loss and not more
than that. Consequently, UAC is liable to insure for the loss experienced by SOB due to the
maritime perils during the voyage since they have insured for it.
The conclusion is, SOB, as the insured, can claim against UAC, the international marine insurer,
for the losses of the goods due to the fire during the voyage.
4
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ISSUE 2
Whether SOB can take action against National MegaShipping Inc. (NMI) for not sailing directly
to Vietnam and stopping at the Port of Songkhla?
Under “Article 1(7) of the Hamburg Rules”, a document that indicates a marine transportation
contract, the carrier's loading of the goods or assumption of responsibility, and the carrier's
4 promise to deliver the goods in exchange for the document’s surrender is called a “bill of
2 lading”. In the shipper's possession, the bills of lading may serve as a proof of the carriage
contract.
3 According to the ruling in “Crooks v. Allan”2, a bill of lading is merely evidence of a contract
and not the actual contract itself. A shipper may not be subject to all the restrictions stated in the
bill if he accepts the ship owner’s bill of lading and believes the goods would be delivered on the
customary terms agreed orally by the two parties. It should be mentioned that the shipper was
assured by the ship’s agent as stated in “The Ardennes”3 case where the ship would arrive by
7 December 1st by sailing directly to London. The ship owner relied on the bill of lading which
13 had a clause permitting the ship to make adjustments while at sea. The bill of lading which is not
the actual contract, shows proof of the agreed terms, affirmed by Lord Goddard, CJ. Oral
15 testimony that outlines the exact terms decided upon before the issuance of the bill of lading is
admissible at court.
Based on the guidelines set forth in the case of Crooks, Syarikat Otomobil Berhad (SOB) may
file a lawsuit against NMI in this particular instance. According to the provision stated above, the
6 bill of lading is not the actual contract but the evidence of the carriage contract. The Ardennes
case confirms that oral proof of past agreements is admissible to override contradictory
conditions in the bill and holds that oral agreements between the ship owner and shipper take
precedence over stipulations in the bill of lading. In the current situation, SOB claims that they
agreed in an earlier agreement the ship would directly sail to Vietnam without shipping, which
contradicts the bill of lading clause permitting stops at any port. SOB can present this earlier
2
[1879] 5 Q.B.D 38
3
[1951] 1 KB 55
5
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agreement as evidence of the actual terms, arguing that NMI’s deviation breached the agreed
contract.
Thus, SOB has valid grounds to take action against NMI for not sailing directly to Vietnam and
stopping at the Port of Songkhla.
6
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ISSUE 3
Whether UAC has the right to object to SOB's claim for their goods to be returned back to them
as the rightful owner and instead instruct the goods to be surrendered to them upon full
compensation?
5 Subrogation is a principle under marine insurance law. An insurer being given or subrogated all
the rights and remedies of the insured to whom he settles all payment for loss against third
parties is called subrogation. “Section 79(1) of MIA 1906” states that a subject matter which is
the interest of the insured is able to be acquired by the insurer if he pays full compensation for
8 the damage. The remedies and rights are subrogated from the time the casualty caused the loss to
the insurer on the matter of interest. The “Indemnity Doctrine” also prevents the insured from
receiving more than the damage or loss occurred. Once full compensation is paid, unless stated
or agreed otherwise, the insured loses all interest in the goods.
5 The case of “Simpson v Thompson”4, states that an insurer is legally entitled to all the remedies
and rights if they have indemnified the insured which could have been used to protect themselves
or recover the loss. Further explained in the case of “Attorney General v Glen Line Ltd”5,
where a seized ship during World War I was declared a total loss and the insurers fully
1 compensated for it. However, it was later sold for more than its insured value in which the court
held that the insurers were entitled to acquire the excess amount upholding the principle of
subrogation which ensures the insured is not overcompensated or profit from their loss.
Applying these principles to the current scenario, since UAC has paid SOB full compensation to
UAC under marine insurance policy due to the fire for the loss of goods, UAC is automatically
entitled to assume rights over the recovered goods under the principle of subrogation. SOB’s
claim for the recovered goods post-compensation after a month is not allowed since the
ownership rights over the recovered goods have been transferred to UAC upon full payment. By
accepting full compensation for the loss from UAC, SOB loses the right to reclaim the goods and
the ownership. UAC has the right to object to SOB's application of the recovered goods to be
returned to them as they no longer hold ownership over them. UAC’s instruction to instead have
4
[1877] UKHL J1213-1
5
[1930] 37 Ll.L.Rep. 55
7
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the recovered goods surrendered to them is also legally valid and enforceable since UAC has full
ownership rights over the goods now after paying the compensation.
In conclusion, UAC has the right to object to SOB's claim for their goods to be returned back to
them and UAC is allowed to instruct the goods to be surrendered to them upon full
compensation.
8
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3.0 CONCLUSION
In conclusion, the MIA outlines the principles of marine insurance law to provide clear
guidelines for claims, contractual obligations, and the transfer of rights. In the first issue, SOB
has a valid claim against UAC for the damaged goods caused by fire during the voyage because
fire is a recognized maritime peril covered by the MIA. The damage was directly attributable to
an insured peril, with no influence from external factors, thus meeting the Act's requirements.
Therefore, UAC is liable to indemnify SOB for the actual losses incurred due to the fire, as
stipulated in the insurance policy.
In the second issue, SOB may take legal action against NMI for violating an earlier agreement to
sail directly to Vietnam. This breach, supported by case law such as The Ardennes, emphasizes
the importance of oral agreements over conflicting clauses in bills of lading when such evidence
is admissible. SOB's ability to prove the agreed-upon terms prior to the voyage strengthens their
case against NMI's deviation.
Third issue, under the subrogation principle, UAC has the right to assume ownership of the
goods after receiving full compensation for the total loss. SOB's claim for the return of goods
post-compensation is invalid because their ownership rights were transferred to UAC after the
indemnity was paid. UAC has the right to object to SOB's request and instruct that the recovered
goods be surrendered to them under the doctrine of indemnity and subrogation. This framework
ensures that marine insurance laws are applied equitably, protecting both the insured and the
insurer's rights.
9
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4.0 REFERENCES
Attorney General v. Glen Line Ltd [1930] 37 Ll.L.Rep. 55
Civil Law Act 1956
Crooks v. Allan [1879] 5 Q.B.D 38
Leyland Shipping Company, Limited v Norwich Union Fire Insurance Society, Limited [1918]
AC 350
Marine Insurance Act 1906
Nicholas Joseph Healy. (n.d.). International Maritime Organization (IMO). Encyclopedia
Britannica.
https://www.britannica.com/topic/International-Maritime-Organization
Ong, C. (2023, April 17). Determining the ‘proximate cause’ of loss / damage - Lessons from
Allianz v University of Exeter [2023] EWHC 630 and Leyland Shipping v Norwich Union
[1918] AC 350. Sharpe & Jagger LLC.
https://sjlaw.com.sg/determining-the-proximate-cause-of-loss-damage-lessons-from-allia
nz-v-university-of-exeter-2023-ewhc-630-and-leyland-shipping-v-norwich-union-1918-a
c-350/
Simpson v. Thompson [1877] UKHL J1213-1
Tan Pui Yen. ( 2022, April 28). Marine Insurance Act 1906 – Maritime Law Malaysia.
https://www.maritimelaw.com.my/tag/marine-insurance-act-1906/
The Ardennes [1951] 1 KB 55
10
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