It is possible to define a ship management contract, which is widely used in the maritime transportation, as a contract concluded between the Owners and the ship managers, whereby the management of the ship belonging to the Owners in commercial, technical or other areas is wholly or partially entrusted to the ship managers for a certain fee. Since the ship managers are in direct interaction with third parties in the areas where it undertakes the management of the ship, they frequently faces lawsuits against them. However, in accordance with Turkish Law, is it possible for third parties to direct their claims to the ship manager? In this newsletter, we will examine whether the third parties can claim from the ship managers pursuant to the provisions on the Owners’ liability.
SHIP MANAGERS CANNOT BE CONSIDERED AS OWNERS IN THEIR RELATIONS WITH THIRD PARTIES
Under Turkish law, the Owners are liable for the debts arising from the operation of the ship. According to the Turkish Commercial Code, in order for a person to be held liable as an Owner, it must use a ship belonging to itself or to another person in maritime trade on its own behalf and account for the purpose of earning profit.
TURKISH COMMERCIAL CODE ARTICLE 1061- (1) The shipowner is the ship owner who uses its ship in the water for the purpose of gaining benefit.
(2) A person who uses a ship which is not its own in the water on its own behalf or through the master for the purpose of gaining benefit is considered to be the shipowner in its relations with third parties.
According to the ship management contract, the ship manager is a person who performs the duty of ship management for a fee determined in the contract. The fact that the ship manager manages the ship for a predetermined fee shows that he does not use the ship on his own behalf and account, but performs the works related to the management of the ship on behalf and account of the Owner for the fee specified in the contract. For this reason, it is not possible for the ship manager to be considered as the Owner against third parties and therefore to be liable to third parties who are damaged. There are also decisions of the Supreme Court on this issue.
11th Civil Chamber of Supreme Court, Decision No. 2017/863 E. 2018/6634 K. dated 24.10.2018
"The court held that the ship owner transferred to the ship manager the authority and obligation to manage the ship on his behalf in return for a fee pursuant to the "..." contract, the ship manager did not use the ship in maritime trade on his own behalf and account, the gains and losses arising from the operation of the ship belong to the Owner, Defendant company is not the Owner of the ship subject to the lawsuit, the defendant company is not the Owner of the ship but it is the ship manager of the ship, and the ship manager is an representative in the sense of Article 32 of the Obligations Code No. 818 (Article 40 of the Turkish Obligations Code No.60102) and an agent in the sense of Article 116 of the Code No. 6762 (No. 6102 .... 102), ... It has been decided to dismiss the lawsuit due to the lack of passive hostility on the grounds that a lawsuit can only be filed against the agent on behalf of his client in accordance with Article 117."
LIABILITY OF THE SHIP MANAGERS IN CASE OF AN ORGANIC BOND BETWEEN THE OWNERS AND THE SHIP MANAGERS
Although the ship managers are not considered as the Owners in their relations with third parties, it is frequently encountered that the courts hold the ship managers liable for the damages suffered by the third party. The courts base this decision on the organic bond between the ship managers and the Owners. One of the most important features of the ship management contract is that the ship managers do not have any organic bond with the Owners. In the event that the ship manager is a subsidiary of the Owner company or has any organic bond with the Owner, it is not possible to refer to a ship management contract. In such a case, the relationship is defined as a relationship of indirect representation.
If it is proved that the ship manager is a company with organic bonds with the shipowner, the ship management agreement between them is deemed invalid by the court on the grounds that it is collusive and is not taken into consideration in determining the hostility. The ship manager, who is organically bound to the Owners in any way, will be liable to third parties in the capacity of the Owners, since it will be assumed that it manages the ship on his own behalf and account, despite the existence of a ship management contract.
Briefly, according to Turkish Law, the Owners are liable for the debts arising from the operation of the ship, and the persons who use the ship in commerce on their own behalf and account shall have the title of Owners against third parties. The ship manager is the person who undertakes the management of the ship belonging to the shipowner for a fee determined in the contract and manages the ship on behalf and account of the Owners. Since the ship manager does not meet this condition, it is not liable to third parties for the debts arising from the operation of the ship. However, if it is proved that there is an organic bond between the Owner and the ship manager, the ship manager shall be considered to be using the ship in trade on its own behalf and account and shall be liable for the claims of third parties who are damaged.