This was an appeal from the judgment of the Istanbul 51st Commercial Court of First Instance (1 April 2014, 2007/218-2014/172).

The plaintiff insurer argued that vessel X was insured under a hull insurance contract, alleging that the first defendant, the carrier, was the policyholder, while the second defendant, the owner of the vessel, was the insured. On 1 August 2003, while en route to ... Port, vessel X suffered an explosion and fire, leaving it stranded in the middle of the sea. The crew extinguished the fire. Based on the classification society's advice that the vessel could continue sailing with its turbocharger deactivated, it headed towards ... Port to unload its cargo. On 9 August 2003, under normal sea and weather conditions, vessel X sank along with its cargo. Indemnity payments were made to the cargo interest under the policies. The plaintiff insurer alleged that it had been subrogated into the claim rights against the defendant carrier and shipowner and demanded from the defendants, jointly and severally, the equivalent to 640,946.00 SDRs in TRY, with interest, costs, and attorney fees.

The first defendant stated that it was not the carrier and was not responsible for any damage. It confirmed that the vessel was fit for the journey - it was fully seaworthy in three aspects (the sea, the voyage, and the cargo) at the start and throughout the voyage. It argued that there was no connection between the turbocharger malfunction and the ship's sinking, and requested the dismissal of the case.

The second defendant contended that it was based in London and should be sued in the High Court of Justice in London, where it was domiciled.

The Commercial Court of First Instance determined that the carrier's failure to exercise due diligence in handling the cargo led to aggravated fault liability and contractual liability. The incident involved the vessel taking cargo from ... Port and heading to Algeria's ... Port when a fire broke out in its engine west of ... Island on 1 August 2003. Due to the damage, the engine was shut down following the operator's instructions for inspections and surveys, arriving at ... Port on 2 August 2003. On 9 August 2003, while 70 nm northeast of Greece's ... Port, water entered the engine room and then the cargo hold, causing the ship to sink. It was found that before departing from ... Port, the defendant carrier had conducted all necessary checks and surveys to ensure the vessel's suitability for the cargo, had received permission to depart from the Port Authority, and had also received approval from the relevant classification society, confirming the ship's fitness for the sea voyage from the start. However, water ingress after leaving ... Port was the sole result of a valve to the hold that may have been left open either while at ... Port or afterwards. Despite the carrier's due diligence, this deficiency, which impacted on the ship's cargoworthiness, could not have been detected. Thus, the carrier could not be held liable for this under art 1061 of the Turkish Commercial Code (No 6762, TCC) [based on art 3.2 of the Hague Rules and the Hague-Visby Rules], as such a deficiency could not have been foreseen by a prudent carrier.

The Court was also required to determine whether the crew was at fault for leaving the valve open, and if it constituted a technical or commercial fault. [Technical faults refer to nautical faults under art 4.2.a of the Hague Rules and the Hague-Visby Rules, which exempt the carrier from liability for acts, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or the management of the ship; while a commercial fault refers to faults related to the obligation to take proper care of the cargo under art 3.2 of the Rules.] The expert panels varied in their assessments, with the first-panel report suggesting carrier liability under the technical fault, while the third-panel report and subsequent reports viewed leaving the valve open as negligence related to cargo preservation measures, categorising it as a technical fault. However, it was found that if the purpose were to preserve the cargo's good condition, it would be a commercial fault; if it were to maintain the ship’s good condition, then it would be a technical fault. The dominant view in international practice suggested that the motive behind an action dictated its classification. Failures in properly closing taps and valve covers were cited as examples of paradigm technical management faults, which, under art 1062/2 of TTK [art 4.2.a of the Hague Rules and the Hague-Visby Rules], did not result in carrier liability for damages caused by such technical faults.

Ultimately, the Court ruled to dismiss the case against the first defendant due to the absence of liability for damages resulting from technical faults. It also accepted the international jurisdiction objection from the second defendant.

The decision was appealed by the plaintiff.

Held: Appealed dismissed.

The Court of Appeal found that, upon reviewing the information and documents in the case file, and after discussing and evaluating the evidence upon which the Commercial Court of First Instance’s decision was based, there were no procedural or legal errors. Therefore, all appeal objections raised by the plaintiff were dismissed.