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Rule 43 Towage

1 The Association shall cover liabilities, costs and expenses arising out of the towage of the Ship, or out of the towage of a vessel by the Ship, provided that such liabilities, costs and expenses are:

a within the cover available under any other Rule; and

b not excluded by Rules 43.2 or 43.3.

2 The Association shall not cover liabilities, losses, costs or expenses incurred under or pursuant to the terms of a contract for the towage of the Ship other than:

a a contract entered into for the purpose of entering or leaving port, or manoeuvring within the port, during the ordinary course of trading; or

b a contract entered into in the ordinary course of trading for the towage of such ships as are habitually towed from place to place; or

c a contract which has been approved by the Association.

3 The Association shall not cover liability for loss of or damage to or wreck removal of a vessel or other floating structure towed by the Ship or the cargo or other property on such tow (together with costs and expenses associated therewith), save insofar as:

a the towage or attempt thereat is made for the purpose of saving or attempting to save life or property at sea; or

b the Ship is entered as a tug or otherwise on the basis that it will engage in towing in the ordinary course of business, and the tow is undertaken on contractual terms approved by the Association (whether or not the Member is a party to the contract); or
 

Notes:

1 The following standard terms of contracts are approved by the Association, provided they are not materially amended:

a UK, Netherlands or Scandinavian standard towage conditions;

b Towcon or Towhire;

c Lloyd’s Standard Form of Salvage Agreements.

2 The Association will otherwise expect the contract to incorporate a term under which each Party is responsible for any loss or damage to its own property or equipment and for loss of life or personal injury to its own personnel, without any recourse against the other. 

c cover has been agreed with the Association prior to the commencement of the towage.

 

Guidance

(A) …liabilities, costs and expenses arising out of the towage of the Ship, or out of the towage of a vessel by the Ship… (Rule 43.1)
Cover is available from the Association for liabilities, costs and expenses that arise as a result of towage operations that involve the entered Ship, whether that is the towing ship or the ship that is being towed.

The risks of liabilities, costs and expenses that are associated with towage operations, whether the entered Ship is the tow or the towing ship, are far greater than those that are normally associated with normal everyday shipping operations. For example, the towing ship may be damaged by a collision with the tow or pulled down into the sea by a sudden tightening of the hawser. 

Consequently, cover for towage operations is available only when the liabilities, costs and expenses (a) fall within the cover that is provided by one of the other P&I Rules, and (b), are not excluded by Rules 43.2 or 43.3. In general terms, Rules 43.2 and 43.3 exclude risks imposed by towage operations that would not ordinarily be experienced by the entered Ship when engaged in normal trading and which are, therefore, considered to be risks that are additional to, or greater than, those that are normally faced by the membership as a whole. They include liabilities arising under towage contracts other than those that are concluded in the ordinary course of trading. If a claim falls within these exclusions, cover is not available even though cover would otherwise have been available under another P&I Rule. 

(B) …liabilities, costs and expenses… (Rule 43.1)
Towage liabilities may be incurred by a Member in tort or in contract. Liability in tort can arise even when there is no contractual relationship, since all persons owe a duty of care not to harm the person or the property of any other person that could foreseeably be harmed by their conduct. Consequently, a Member has a duty to ensure that he and all his servants and agents exercise due care to ensure that his Ship does not cause loss or damage to others. Should the Member or his servants or agents fail to exercise that degree of care, the Member may be liable to pay damages to third parties that suffer loss or damage as a result. 

In the absence of a contract, the normal rule is that the ship which is at fault is liable, whether that ship is the towing ship or the tow. Should both ships be to blame, liability is apportioned between them according to their respective proportion of blame. However, since the towing ship is usually in control of the tow, it is normally the towing ship that is considered to be liable. Nevertheless, in some countries, the towing ship is considered to be the servant of the tow with the result that the tow may be held liable even for the fault of the towing ship. 

In most cases, the towing ship will require the master of the tow to enter into an express towage contract before agreeing to carry out the towage operations. However, even if no formal contract is agreed or signed, the existence of a contract may be implied as a result of the parties’ conduct, and a previous course of dealing between the parties may be relevant in establishing the form and terms of such a contract. If such a contractual relationship, whether express or implied, is found to exist, liability will normally be governed by the terms of that contract as construed by its governing law, rather than by the principles of tort described above. Most towage contracts either place liability for the towage operations on the tow, regardless of fault, or allocate liability between the tow and the towing ship on a ’knock-for-knock‘ basis.1 Nevertheless, such contractual terms may be superseded by, or supplemented by, statute or by the local laws of the country where the claim is brought. 

(C) …within the cover available under any other Rule… (Rule 43.1.a)
Cover is available only if the towage liabilities, costs and expenses fall within the cover that is available under any other Rule and/or any special terms of entry. Therefore, it is necessary in each case to examine the relevant Rule(s) and/or special terms of entry (if any) that may govern the risk. For example, in the case of collision liability arising as a result of towage operations, cover is usually available for that proportion of the collision liability that is not covered by the Hull Policies.2 However, cover is not available if the Member has failed to take out hull insurance on standard terms or if, pursuant to special terms of entry, the collision liability of the entered Ship is covered in full by the Hull Policies. 

(D) …not excluded by Rules 43.2 or 43.3… (Rule 43.1.b)
However, whilst cover is available in principle for liabilities, costs and expenses that arise as a result of towage operations if they fall within the usual scope of the P&I cover, the provisions of Rules 43.2 and 43.3 establish important exclusions to this general rule. 

NB! Rule 43.2 regulates the cover that is available when it is the entered Ship that is being towed whereas Rule 43.3 regulates the cover that is available when the entered Ship is the towing ship. 

(E) The Association shall not cover liabilities, losses, costs or expenses incurred under or pursuant to the terms of a contract for the towage of the Ship… (Rule 43.2)
Cover is not available for liabilities, losses etc., that arise when the Ship is being towed pursuant to a contract. However, cover is nevertheless, available for liabilities, costs and expenses that arise as a result of such operations if they arise under the terms of a contract that was entered into in the ordinary course of the Ship’s trading or, in other circumstances, if the contract terms have been approved by the Association. 

The Association requires towage contracts to be approved primarily because most towage contracts seek to transfer some, if not all, liabilities, costs and expenses from the towing ship to the tow. Consequently, this greatly increases the Member’s exposure to liability when his Ship is being towed. The Member is therefore urged to consult the Association before agreeing to such contracts in order to ensure that the terms of the contract are reasonable, and that cover is available. 

(F) …other than a contract entered into for the purpose of entering or leaving port, or manoeuvring within the port, during the ordinary course of trading... (Rule 43.2.a)
Ships often need assistance to enter or leave port, to dock or undock, and to manoeuvre within ports, and it is usual for such assistance to be rendered pursuant to contractual terms or local regulations that are onerous for the Ship and the Member. However, since such liability exposure is regularly faced by the majority of Members in the ordinary course of trading, this is considered to be a mutual risk and, therefore, cover is available for liabilities, costs and expenses that arise as a result of harbour towage that is carried out in the ordinary course of the Ship’s trading, and the Member is not required to obtain the prior approval of the Association to the terms of a contract for such services. 

(G) ...contract entered into in the ordinary course of trading for the towage of such ships as are habitually towed from place to place… (Rule 43.2.b)
Cover is also available for liabilities, costs and expenses that arise as a result of the towage of an entered Ship that is customarily towed in the ordinary course of its trading, e.g. a barge that has no motive power of its own. However, unlike Rule 43.2.a, no geographical restriction is placed on this type of towage. Therefore, cover is available in the event of ocean-going, as well as port, towage, provided that such towage is customarily undertaken in the ordinary course of the Ship’s trading. 

(H) …a contract which has been approved by the Association… (Rule 43.2.c)
Where liabilities, costs or expenses do not arise as a result of an activity that falls within the scope of Rules 43.2.a or b, cover is not available unless they arise pursuant to the terms of a contract that has been approved by the Association. Normally, the Association will approve either the Towcon or the Towhire contracts,3 but will not approve the use of the UK, Netherlands or Scandinavian standard conditions for towage of an entered Ship, since such conditions seek to place all liability on the ship that is being towed. 

(I) The Association shall not cover liability for loss of or damage to or wreck removal of a vessel or other floating structure towed by the Ship or the cargo or other property on such tow… (Rule 43.3)
Whereas Rule 43.2 regulates the cover that is available when the Ship is the towed vessel, Rule 43.3 regulates the cover that is available when the entered Ship is the towing ship. 

Rule 43.3 provides that cover is not, subject to certain exceptions, available where the entered Ship acts as the tug or towing ship regardless of whether such towage takes place pursuant to a contract. 

Towage requires specialist skills and often requires specialised equipment. A ship that is not a fully fitted tug is unlikely to have either the equipment or the crew that will be necessary in order to conduct safe towage operations, and errors of judgment, or failures of equipment, can lead to the loss of the tow and her cargo, and expose the Member to large claims, not only from the owners of the tug and tow, but also from authorities that require removal of the wreckage. Such liabilities are not considered to be liabilities that should be shared by the membership as a whole in the context of mutuality. Consequently, cover is not available for liability, costs and expenses that the Member may incur as a result of the loss of, or damage to, a vessel or other floating structure that is being towed by the entered Ship, or for cargo or other property that is on such vessel or floating structure, or for the wreck removal of such vessel or floating structure, or of cargo or other property that is on such vessel or floating structure, except in the two specific instances that are described in Rules 43.3.a and b. 

(J) …saving or attempting to save life or property at sea… (Rule 43.3.a)
Notwithstanding the general exclusion of cover outlined in Rule 43.3 for certain liabilities, costs and expenses, cover is available for such liabilities etc., that are incurred by the Member in circumstances where the Ship renders towage services (even if unsuccessful) in order to save or to attempt to save a ship that is in distress, or any other property or persons that are in danger at sea. The availability of such cover reflects the basic humanitarian and moral principles that should, and do, apply in such circumstances.4 

(K) …towing in the ordinary course of business, and…on contractual terms approved by the Association… (Rule 43.3.b)
Notwithstanding the general exclusion of cover that is outlined in Rule 43.3 for certain liabilities, costs and expenses, cover is, nevertheless, available for such liabilities etc., that are incurred by the Member, where the Ship is entered as a tug or similar type of ship that renders towage services as part of its ordinary business, provided that such towage operations are governed by contractual terms that have been approved by the Association. 

Although, in principle, the terms of each contract must be approved by the Association before the commencement of the towage, the Association has acknowledged that the standard conditions that are itemised in the Notes to Rule 43.3 are terms that have been approved by the Association for the purposes of cover provided that such terms are not materially amended. These standard terms are the following: 

(L) …UK…standard towage conditions… (Rule 43.3.b Note 1.a)
The UK Standard Towage Conditions (the UK Conditions) were first introduced in 1934, although they have undergone certain revisions since then, and were the terms that were most commonly used for ocean towage before the introduction of the Towcon and Towhire contracts in 1985. The UK Conditions place the risk of liability or loss arising as a result of towage operations on the tow, and the tow is obliged to indemnify the towing ship for any loss or damage that may be caused to the towing ship, or to cargo or other property that may be on board, or for any liability that is incurred by the towing ship to any third party. The tow is also prevented from bringing any claim against the towing ship, e.g. for damage that is caused to the tow by the towing ship or by anything that is on board the towing ship. 

(M) …Netherlands or Scandinavian standard towage conditions… (Rule 43.3.b Note 1.a)
These conditions are similar to, but not identical with, the UK Conditions. For example, the Netherlands Towage Conditions 1951 provide the tow with defences to claims that may be brought against it by the towing ship for damage that has been caused to the towing ship by the fault of the towing ship, and also for damage that may be caused to property that is owned by a third-party as a result of a collision with the towing ship, provided that this has not been caused either in full or in part by the tow. Like the UK Conditions, the Netherlands and Scandinavian Conditions have also become less popular since the introduction of the Towcon and Towhire contracts. However, the Netherlands Towage Conditions apply by force of law to towage within Dutch territorial waters if the towage is carried out by a Dutch tug owner. 

(N) …Towcon…or…Towhire… (Rule 43.3.b Note 1.b)
The Towcon and Towhire contracts were introduced by BIMCO in 1985 and are now more widely used than the UK Conditions or any other conditions. The main difference between the Towcon and the Towhire contracts is that, pursuant to the Towcon contract, the towing ship is paid for the towage services on a lump sum basis as in the case of a voyage charter, whereas under the Towhire contract, the towing ship is paid on a daily hire basis as in the case of a time charter. 

Whereas the UK, Netherlands and Scandinavian Conditions place the risk of the towage operation on the tow, the Towcon and Towhire contracts allocate the risk between the towing ship and the tow so that each ship is responsible for its own loss or damage, including injury to, or death of, its own servants or agents, or for any claims that may be brought by third parties for damage or loss that they have incurred, e.g. by obstruction. This principle is known as the ’knock-for-knock’ principle.5 

(O) …Lloyd’s Standard Form of Salvage Agreements... (Rule 43.3.b Note 1.c)
Salvage operations often involve the towage of a ship that is, or has been, caught in the grip of a peril. Cover is available for liabilities etc., that are incurred by the Member when the Ship renders towage services under the terms of the Lloyd’s Standard Form of Salvage Agreement, more commonly known as the Lloyd’s Open Form or LOF. 

(P) …a term under which each Party is responsible for any loss or damage to its own property or equipment… (Rule 43.3.b Note 2)
If the towage services are not rendered pursuant to any of the standard terms itemised above, cover is available only if the contract incorporates a ’knock-for-knock’ type of risk allocation clause that is similar to that which is found in the Towcon and Towhire contracts, and only if such terms are agreed not only between the Member and the owners of the tow, but also between the Member and the owners of any cargo or other property that is on board the tow. 

(Q) …cover has been agreed with the Association prior to the commencement of the towage. (Rule 43.3.c)

Should the Ship render salvage services in situations other than those that are described in, Rules 43.3.a and 43.3.b, cover is available for liabilities etc., that are incurred by the Member only if the Member has obtained confirmation of cover from the Association before the commencement of the towage operation. 

Similarly, if the towing Ship and the towed Ship are both entered in the Association, the Association will wish to approve the towage contract prior to the commencement of the towage.


 

1 See (N) and (P) below.
2 See the Guidance to Rule 36.
3 See (N) below
4 There may also be a legal duty to assist persons in distress. See Article 10 of the International Convention on Salvage 1989 and the Guidance to Rule 31.
5 See the Guidance to Rule 78.5.
6 See the Guidance to Rule 42.