Classification Society Liability
By Gry Bratvold and Gaute Gjelsten of Wikborg Rein
Classification societies occupy a unique place in the field of maritime law and commerce, despite, or perhaps because of, the controversy that surrounds them.
Classification societies enforce statutory requirements on behalf of flag and port states yet they are not government agencies themselves. They have the power to impose sanctions yet they also compete for the business of those who come under their scrutiny. They make and enforce the rules but also offer consulting services on how best to comply. Increasingly, this mix of roles and attitudes has struck many observers as problematic in the context of the discussion over whether classification societies should be made legally liable for their negligence. The three most frequently heard arguments against liability are:
- the relatively small size of classification fees cannot justify the potential liability exposure;
- the shipowner has ultimate responsibility for vessel seaworthiness; and
- the “special character” of a public service institution should provide relief from legal liability.
In today’s world, classification societies are hardly unique among professionals who charge relatively small amounts for their services, yet still they risk a considerable economic liability for losses caused by their negligence. Other professionals customarily minimise the risk through different forms of insurance arrangements and increasingly the societies have done the same.
While the shipowner always remains responsible for his vessel’s seaworthiness, he or she should be able to rely on the class certificate. But if the classification society is unwilling to accept legal responsibility for its judgments then how much credibility can an owner or insurer be reasonably expected to place in the certificate? In the case of newbuildings, the class representative (customarily paid by the yard) has not just performed one survey but rather been a regular presence on site throughout the vessel’s construction. Under such circumstances, is it appropriate for a new owner to bear the risk of loss caused by the classification society’s negligence if the vessel is designed, built and tested in accordance with the classification society’s own rules, and where this control has led to a classification certificate and delivery of the vessel?
In Norway the authorities have delegated certain control functions through the Agreement of 1 July 1987 with annexes between the Ministry of Trade and Det Norske Veritas (“DNV”). This delegation has lead to some questions regarding the role of DNV. The tasks DNV performs on behalf of the authorities are considered to be more of a service than business nature. Activities of a service nature have traditionally held a protected position in Norwegian tort law, and there might be reason to ask if this protection has influenced the discussion on classification societies’ liability for those tasks that are not performed on behalf of the authorities.
The claim that classification societies are public spirited service institutions deserving of special treatment with regard to liability dates back many years. Today, it must be examined in light of the fact that hospitals, health professionals, accountancy firms, and even government agencies are all now held legally liable for their negligence. While it is certainly true that classification societies perform important and valuable research on improving safety at sea, commentators have questioned whether it is still appropriate for that research to be carried out by each society individually. If classification societies are deserving of special treatment with regard to liability because of their public mission, then many believe the public mission would be more efficiently and effectively pursued by combining resources through one set of standards rather than the societies competing amongst themselves.
The long simmering debate over classification society liability was raised a notch in 2003 when the Spanish government sued the classification society responsible for classing the PRESTIGE: there are no signs of it cooling anytime in the near future. As shipowners are increasingly held accountable by class for their performance and actions, they are expecting nothing less than the same of classification societies. On the legal front, the trend is in favour of increased liability for government bodies dealing with matters of a “service nature” and classification societies seem unlikely to escape the same fate in the long term.