Time bars are part of everyday life in the world of dispute resolution, and certainly in commercial shipping, where they are generally shorter than elsewhere. Once your claim is time barred there is no possibility of recovering it
It is therefore essential to ensure time bars do not lapse and imperative to check their validity before committing yourself to a course of action. It is evident, however, that some of the extensions commonly granted in certain jurisdictions are clearly invalid. It is common practice in the shipping world to extend a time bar by agreement between the creditor and the debtor. Such agreements prevent the need for a creditor to commence proceedings against the debtor in a situation where parties are still talking and considering a settlement. However, creditors should be aware of the risk that an agreement to extend a statutory time bar may not be valid and enforceable, with the result that their claim is found to be time barred despite the agreement made with the debtor. That is the situation in the Netherlands, as well as in certain other countries. The section of the civil code in the Netherlands which deals with transport allows for the extension of a time bar. However, this provision was only written for claims based on that section of the civil code which includes, for example, claims based on charter parties and collisions. With this provision in mind, shipping interests routinely grant extensions for time bars. But it is commonly forgotten that such extensions are clearly invalid and thus unenforceable if and when the claim does not follow from the specific transport section. A very clear provision in the general part of the Netherlands civil code clearly prohibits agreements on the extension of a statutory time bar (prior to its lapse), which effectively makes it impossible to agree on a valid extension.Creditors should realise that the prohibition applies to various claims which relate to the shipping industry but are not based on the transport section of the civil code. One can, for example, think of claims following on from a shipbuilding or ship repair contract. It happens quite often that a ship owner or technical manager agrees with a yard to extend the time bars on a contractual guarantee claim. Very few players in the industry realise that such agreements are invalid when they pass the statutory time bar for such claims. The consequences can be serious for creditors and their advisers. Another example is a subrogated claim for personal injury caused during a maritime event. Such a claim may not fall under the transport section of the civil code and an extension of the time bar on such a claim may therefore also be unenforceable. Ultimately, it is the debtor who must decide whether or not to invoke a time bar, as the courts can only reject a claim on the basis of a time bar if that defence is raised by the debtor. Keeping in mind those extensions may not be valid; the creditor is really in the hands of the debtor when it starts proceedings beyond the lapse of the time bar. This situation is not peculiar to the Netherlands. It—or a variation of it—is found in a number of other jurisdictions. Time bar extensions can be a very valuable, practical and cost-effective means of preserving your interests in a maritime dispute. But it is as well to take nothing for granted and to check the validity of an intended extension very carefully before relying on it.
“Published in Lloyd’s List on April 6, 2011.”