B-121169, JUNE 15, 1955, 34 COMP. GEN. 676

B-121169: Jun 15, 1955

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THE PAYMENT SHOULD NOT BE MADE UNTIL THE QUESTION OF LAW IS REFERRED TO THE GENERAL ACCOUNTING OFFICE FOR DECISION OR. 1955: REFERENCE IS MADE TO LETTER DATED NOVEMBER 24. IT IS STATED IN THE LETTERS THAT THE MILITARY SEA TRANSPORTATION SERVICE OF YOUR DEPARTMENT HAS BEEN FORWARDING SUCH CLAIMS FOR GENERAL AVERAGE AND SALVAGE CONTRIBUTION TO OUR OFFICE FOR SETTLEMENT PURSUANT TO OUR DECISION B-55025. THE LETTER POINTS OUT THAT REPRESENTATIVES OF THE ADMIRALTY AND SHIPPING SECTION OF THE DEPARTMENT OF JUSTICE INFORMALLY HAVE QUESTIONED THE PROPRIETY OF NAVY CONTRACTING OFFICERS SUBMITTING TO THE GENERAL ACCOUNTING OFFICE FOR DECISION MATTERS WHICH THE CONTRACT TERMS APPARENTLY REQUIRE TO BE DECIDED BY THE CONTRACTING OFFICER.

B-121169, JUNE 15, 1955, 34 COMP. GEN. 676

GENERAL AVERAGE AND SALVAGE CLAIMS - MATS CHARTER CONTRACTS CONTAINING DISPUTES CLAUSE - ADMINISTRATIVE V. GENERAL ACCOUNTING OFFICE SETTLEMENT GENERAL AVERAGE AND SALVAGE CLAIMS UNDER MILITARY SEA TRANSPORTATION SERVICE CHARTER CONTRACTS WHICH CONTAIN STANDARD DISPUTES CLAUSES MAY BE SETTLED ADMINISTRATIVELY CONCERNING QUESTIONS OF FACTS, BUT WHERE SETTLEMENT REQUIRES RESOLUTION OF LEGAL QUESTIONS NOT PREVIOUSLY DECIDED BY THE COMPTROLLER GENERAL, OR WHERE THE QUESTION OF LAW HAS NOT BEEN CONCLUSIVELY SETTLED BY THE COURTS, THE PAYMENT SHOULD NOT BE MADE UNTIL THE QUESTION OF LAW IS REFERRED TO THE GENERAL ACCOUNTING OFFICE FOR DECISION OR, IN LIEU THEREOF, THE CLAIM MAY BE FORWARDED FOR DIRECT SETTLEMENT AFTER RESOLUTION OF THE DISPUTED FACTS UNDER THE PROCEDURE IN THE DISPUTES CLAUSE. B-55025, MARCH 18, 1946, MODIFIED.

COMPTROLLER GENERAL CAMPBELL TO THE SECRETARY OF THE NAVY, JUNE 15, 1955:

REFERENCE IS MADE TO LETTER DATED NOVEMBER 24, 1954, FROM THE ASSISTANT SECRETARY OF THE NAVY ( MATERIAL), AS SUPPLEMENTED BY LETTER OF MAY 19, 1955, FROM ALBERT C. KORNBLUM, ASSISTANT TO THE GENERAL COUNSEL, DEPARTMENT OF THE NAVY, RELATIVE TO THE SETTLEMENT OF CLAIMS FOR CONTRIBUTION IN GENERAL AVERAGE AND SALVAGE ARISING UNDER MILITARY SEA TRANSPORTATION SERVICE CHARTER CONTRACTS CONTAINING STANDARD DISPUTES CLAUSES.

IT IS STATED IN THE LETTERS THAT THE MILITARY SEA TRANSPORTATION SERVICE OF YOUR DEPARTMENT HAS BEEN FORWARDING SUCH CLAIMS FOR GENERAL AVERAGE AND SALVAGE CONTRIBUTION TO OUR OFFICE FOR SETTLEMENT PURSUANT TO OUR DECISION B-55025, DATED MARCH 18, 1946. SOME DOUBT HAS ARISEN AS TO THE PROPRIETY AND NECESSITY OF SUCH SUBMISSIONS WHERE GENERAL AVERAGE AND SALVAGE CLAIMS ARISE UNDER MSTS CHARTER CONTRACTS WHICH CONTAIN A STANDARD DISPUTES CLAUSE PROVIDING FOR DETERMINATION OF DISPUTED QUESTIONS OF FACT BY THE CONTRACTING OFFICER WITH THE RIGHT OF APPEAL TO THE SECRETARY OF THE NAVY.

THE LETTER POINTS OUT THAT REPRESENTATIVES OF THE ADMIRALTY AND SHIPPING SECTION OF THE DEPARTMENT OF JUSTICE INFORMALLY HAVE QUESTIONED THE PROPRIETY OF NAVY CONTRACTING OFFICERS SUBMITTING TO THE GENERAL ACCOUNTING OFFICE FOR DECISION MATTERS WHICH THE CONTRACT TERMS APPARENTLY REQUIRE TO BE DECIDED BY THE CONTRACTING OFFICER. ALSO, THE LETTER REFERS TO CASES WHERE DISALLOWANCES OF GENERAL AVERAGE CLAIMS BY OUR OFFICE HAVE BEEN CHALLENGED BY SHIPOWNERS AND THEIR ATTORNEYS, CITING THE PROCEDURE PROVIDED UNDER THE DISPUTES CLAUSE AS THE PROPER COURSE TO FOLLOW. THE LETTER ALSO STATES THAT THE NAVY HAS QUALIFIED PERSONNEL WHO HAVE CONSIDERABLE EXPERIENCE IN THE SHIPPING FIELD TO HANDLE THE MANY TECHNICAL PROBLEMS ARISING IN CONNECTION WITH MATTERS OF GENERAL AVERAGE AND SALVAGE AND STATES THAT THE GENERAL ACCOUNTING OFFICE TO A CONSIDERABLE EXTENT RELIES ON THE ADMINISTRATIVE FINDINGS OF FACT IN THE SETTLEMENT OF SUCH CLAIMS. IT IS STATED THAT, SINCE THESE FINDINGS REFLECT THE JUDGMENT OF SUCH PERSONNEL, THE REFERRAL TO THE GENERAL ACCOUNTING OFFICE OF THESE CLAIMS RESULTS IN ANOTHER ADMINISTRATIVE HANDLING WITH THE ATTENDANT DELAY IN THE FINAL DISPOSITION. IT IS CONTENDED THAT ANY SUCH DELAY TENDS TO FORCE CONTRACTORS TO COMMENCE SUIT IN ORDER TO PREVENT THE RUNNING OF THE TWO YEAR STATUTE OF LIMITATIONS APPLICABLE TO LIBELS BROUGHT AGAINST THE GOVERNMENT UNDER MSTS CHARTER CONTRACTS AND RESULTS IN UNNECESSARY COSTS TO THE CONTRACTOR AND THE GOVERNMENT.

THE LETTER THEREFORE PROPOSES, WITH RESPECT TO ALL CLAIMS FOR GENERAL AVERAGE AND SALVAGE CONTRIBUTION ARISING UNDER CHARTERS CONTAINING THE DISPUTES CLAUSE, THAT THE NECESSARY DETERMINATIONS ATTENDANT TO PAYMENT OR NONPAYMENT BE MADE BY THE CONTRACTING OFFICER WITHOUT REFERRING SUCH MATTERS TO THE GENERAL ACCOUNTING OFFICE; THAT IN CASES WHERE SUCH DETERMINATIONS ARE FAVORABLE TO THE CONTRACTOR, PROMPT PAYMENT BE MADE BY THE DISBURSING OFFICER; AND THAT IN THE CASE OF AN UNFAVORABLE DECISION, THE CONTRACTOR WILL BE PERMITTED TO APPEAL TO THE SECRETARY OF THE NAVY AS PROVIDED IN THE DISPUTES CLAUSE. IT IS STATED THAT THE PRACTICE OF REFERRING CLAIMS TO THE GENERAL ACCOUNTING OFFICE FOR SETTLEMENT WILL CONTINUE AS BEFORE AS TO CLAIMS THAT ARISE UNDER GOVERNMENT BILLS OF LADING OR OTHER AGREEMENTS WHICH DO NOT CONTAIN A DISPUTES CLAUSE.

THE DECISION OF THIS OFFICE, B-55025, DATED MARCH 18, 1946, RESTATED AN EARLIER RULE THAT CLAIMS FOR CONTRIBUTION IN GENERAL AVERAGE INVOLVE SUCH DOUBTFUL QUESTIONS OF LAW AND FACT THAT ACCOUNTABLE OFFICERS SHOULD NOT ASSUME RESPONSIBILITY FOR THE PAYMENTS BUT THE CLAIMS SHOULD BE TRANSMITTED HERE FOR DIRECT SETTLEMENT. THESE INSTRUCTIONS APPARENTLY WERE BASED UPON THE FACT THAT THE BASIS FOR, AND THE CIRCUMSTANCES UNDER, WHICH GENERAL AVERAGE CLAIMS WERE PROPERLY FOR ALLOWANCE, WAS NOT, AS A RULE, THOROUGHLY UNDERSTOOD BY SUCH OFFICERS, WHO WERE FOR THE MOST PART UNACQUAINTED WITH MARITIME LAW AND PRACTICES; THAT SUCH CLAIMS SELDOM AROSE BUT WHEN THEY DID THEY FREQUENTLY INVOLVED SHIPMENTS OF SEVERAL GOVERNMENT AGENCIES; AND THAT CONSISTENT SETTLEMENT ACTION REQUIRED THAT THEY BE SUBMITTED FOR ADJUSTMENT TO OUR OFFICE, A CENTRALIZED AGENCY HAVING THE NECESSARY AUTHORITY TO SETTLE SUCH CLAIMS. THESE INSTRUCTIONS WHEN ISSUED, HOWEVER, INVOLVED GENERAL AVERAGE CLAIMS ARISING UNDER BILL OF LADING CONTRACTS OF AFFREIGHTMENT AND CHARTER PARTIES WHICH DID NOT CONTAIN THE SO-CALLED DISPUTES CLAUSE, THE PRACTICE OF INCLUDING SUCH CLAUSES HAVING ARISEN, OR AT LEAST BEEN MORE FREQUENTLY USED, SINCE THE DATE OF THE 1946 INSTRUCTION AND THE TIME WHEN THE EARLIER RULE WAS ANNOUNCED (1926).

THIS OFFICE RECOGNIZES THE WELL-ESTABLISHED RULE THAT WHERE, BY THE INCLUSION OF A PROVISION IN A CONTRACT, THE PARTIES HAVE AGREED UPON A PROCEDURE TO BE FOLLOWED IN CASES WHERE DISAGREEMENTS ARISE UNDER THE CONTRACT, SUCH AS THE DISPUTES CLAUSE, COMPLIANCE THEREWITH IS NECESSARY AND THE FAILURE TO PURSUE THE ADMINISTRATIVE PROCEDURES AND EXHAUST ALL THE REMEDIES SO PROVIDED MAY PREJUDICE THE RIGHTS OF THE CONTRACTOR TO OTHERWISE ENFORCE SUCH CLAIMS IN THE COURTS. SEE UNITED STATES V. HOLPUCK, 328 U.S. 234, AND THE CASES CITED THEREIN. WHILE THE QUESTION OF WHETHER THE STANDARD DISPUTES CLAUSE IS APPLICABLE TO GENERAL AVERAGE INCIDENTS ARISING IN CONNECTION WITH THE CONTRACT OF CARRIAGE HAS NOT BEEN SETTLED BY AN AUTHORITATIVE COURT DECISION, IT SEEMS LIKELY THAT A COURT WOULD SO HOLD. HOWEVER, IT HAS NOT BEEN OUR INTENTION THAT CONTRACTORS WOULD BE DEPRIVED OF THEIR RIGHTS UNDER THE DISPUTES CLAUSE WHERE GENERAL AVERAGE OR SALVAGE CONTRIBUTION CLAIMS ARE INVOLVED BUT THAT DISPUTED QUESTIONS OF FACT WOULD BE DISPOSED OF UNDER THE PROCEDURES FOR RESOLVING DISPUTES PRIOR TO THE TIME THE CLAIMS ARE FORWARDED HERE FOR SETTLEMENT. ASSUMING THAT GENERAL AVERAGE AND SALVAGE CONTRIBUTION ARE MATTERS UNDER THE CONTRACT, IT IS RECOGNIZED THAT CERTAIN DIFFICULTIES ARISE IN THE PROPER UTILIZATION OF THE PROCEDURE SET OUT IN THE DISPUTES CLAUSE WHERE GENERAL AVERAGE AND SALVAGE CONTRIBUTION CLAIMS ARE SETTLED BY OUR OFFICE. FOR THIS REASON THE ADMINISTRATIVE SETTLEMENT OF THESE CLAIMS WOULD NOT APPEAR TO BE OBJECTIONABLE.

WHILE OUR OFFICE HAS SOME DOUBT AS TO THE ADVISABILITY OF INCLUDING MATTERS OF GENERAL AVERAGE CONTRIBUTION WITHIN THE DISPUTES CLAUSE PROCEDURE BECAUSE OF THE MANY INVOLVED QUESTIONS ARISING THEREUNDER WHICH ARE A MIXTURE OF LAW AND FACT, WE CONCLUDE FOR THE REASONS GENERALLY DISCUSSED ABOVE THAT THE INSTRUCTIONS CONTAINED IN B-55025 OF MARCH 18, 1946, REQUIRING SUCH CLAIMS TO BE TRANSMITTED HERE FOR DISPOSITION, SHOULD NOW BE MODIFIED WITH RESPECT TO THOSE CLAIMS ARISING UNDER CHARTER AGREEMENTS CONTAINING THE SO-CALLED DISPUTES CLAUSE. ACCORDINGLY, THESE CLAIMS NEED NO LONGER BE TRANSMITTED HERE FOR SETTLEMENT BUT SHOULD BE SETTLED ADMINISTRATIVELY WITH DUE REGARD TO THE CONTRACTOR'S RIGHTS UNDER THE SO-CALLED DISPUTES CLAUSE CONCERNING ALL QUESTIONS OF FACT. WHERE, HOWEVER, THE SETTLEMENT REQUIRES THE RESOLUTION OF LEGAL QUESTIONS NOT HERETOFORE DECIDED BY OUR OFFICE, OR WHERE THE QUESTION OF LAW INVOLVED IS NOT CONCLUSIVELY SETTLED BY THE COURTS, THE PAYMENT SHOULD NOT BE MADE ADMINISTRATIVELY UNTIL THE QUESTION HAS BEEN REFERRED HERE FOR APPROPRIATE DECISION OR, IN LIEU THEREOF, THE CLAIM MAY BE FORWARDED FOR DIRECT SETTLEMENT AFTER RESOLUTION OF DISPUTED MATERIAL FACTS UNDER THE PROCEDURE SET FORTH IN THE DISPUTES CLAUSE.