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Bills of Lading A selection of articles previously

published by Gard AS
2

Gard AS, March 2011


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Contents

Introduction........................................................................................................................................5
English law - Switching bills of lading..............................................................................................6
Egyptian law - Bill of lading reservations upheld............................................................................7
Spanish law Validity of jurisdiction clause in a bill of lading.......................................................8
Fake CONGENBILLS.........................................................................................................................9
UCP 600 - How the new rules on documentary credits may affect contracts
of carriage ..................................................................................................................................10
Identity of carrier and jurisdiction clauses in Germany................................................................13
Chinese court applies US law in straight bill of lading case........................................................14
Hong Kong law - Straight bills of lading........................................................................................15
Straight bills under Chinese law ....................................................................................................15
Early departure procedure via e-mail............................................................................................16
When can a master refuse to load damaged cargo?...................................................................17
Short measures Value your bills of lading as much as your pints of beer................................20
Clausing bills of lading correctly - Standard of reasonable care affirmed..................................22
Bills of Lading: Is the shippers stowage request always compulsory?......................................25
Early departure procedure and bills of lading..............................................................................27
US Customs regulations relating to cargo declarations...............................................................29
The problems caused by ante-dating bills of lading....................................................................32
Identity of the carrier - The House of Lords decides....................................................................32
The date of the bill of lading..........................................................................................................33
English lawIs the demise clause now dead and buried?..............................................................35
English law Whose bill of lading is it anyway?............................................................................37
Deck Cargo .....................................................................................................................................39
A Summary of English and US Law................................................................................................39
FIOS revisited ..................................................................................................................................41
FIOS revisited (again)......................................................................................................................43
Delivery of cargo in Chile An English law perspective..............................................................44
Delivery orders.................................................................................................................................47
Delivery of cargo in Chile revisited................................................................................................48

Disclaimer

The information contained in this publication is compiled from material previously published by Gard AS and is
provided for general information purposes only. Whilst we have taken every care to ensure the accuracy and quality
of the information provided at the time of original publication, Gard AS can accept no responsibility in respect of any
loss or damage of any kind whatsoever which may arise from reliance on information contained in this publication
regardless of whether such information originates from Gard AS, its shareholders, correspondents or other
contributors.

Gard AS, March 2011


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A message to all shipowners who agree to deliver cargo against anything
other than a true original bill of lading.....................................................................................49
English law Misdelivery in Chile A follow-up...........................................................................50
English law Straight bills of lading - One more piece in the puzzle.........................................51
Straight bills of lading Delivery Do your bills use clear words?.............................................52
Straight bills of lading Do your bills use clear words? (Part II)..................................................54
Bills of lading - Delivery of cargo - The Republic of Korea and the
Peoples Republic of China........................................................................................................56
The missing bill of lading................................................................................................................58
Cargo shipped on deck - The imperfect bill of lading.................................................................62
Who decides the form of the bill of lading? Owners or charterers?...........................................63
Forum selection clauses in bills of lading......................................................................................66
Non-order bills fully in order after the RAFAELA S?.....................................................................69
Rules apply to straight bills - House of Lords decides RAFAELA S.............................................72
FIOS revisited - The final chapter?.................................................................................................75
US law - Himalaya clauses in multimodal transport......................................................................77
US Law - Date alone on CONGENBILL sufficient to incorporate
a charterparty into a bill of lading.............................................................................................79
Appendix..........................................................................................................................................80
Gard Guidance on Bills of Lading..................................................................................................80

Gard AS, March 2011


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Introduction

This booklet contains a collection of which is the required presentation of an publication is to be a practical reference
loss prevention material relating to bills original bill of lading in order to be able guide and to assist the Master in
of lading and which has been published to take delivery of the cargo. avoiding any pitfalls and problems.
by Gard over the years. The guidance explains, with examples
Although the practice of paperless where possible, what a bill of lading
Gard - the P&I Club - has considerable trading is developing rapidly, can and is used for, the obligations
experience of bill of lading issues shipowners and their Masters will, for the Master has with regard to bills of
both from claims handling as well as many years to come, be burdened lading, the consequences of things not
from dealing with Member enquiries. with the responsibility of signing and being done correctly, what should be
Experience indicates that even the authorising signature of bills of lading, done/considered before signing bills
simplest of mistakes or an oversight and delivering cargo against the same. of lading or authorising others to sign,
in a bill of lading can lead to complex The delivery of cargo carried under how delivery against bills of lading
and expensive problems at a later date. bills of lading is just one of the general should be made and how to deal with
These issues are important considering topics covered by this compilation. specific problems/issues that may arise.
that the Members P&I cover can Other topics include the clausing and Should you wish to obtain a copy of
often be at stake. Gard is committed dating of bills of lading; the identity of the Guidance on Bills of Lading please
to sharing its experience with others the carrier under bills of lading and, contact Gard AS.
through the various loss prevention if the worse happens and a dispute
publications. arises, forum selection clauses. All of Hopefully, this compilation will be
these topics and more are listed in a useful aid in providing guidance,
The bill of lading has its origins in the the contents page of this compilation. answers to a query, or at the very least a
trade and carriage of goods by sea Under each topic you will find listed pointer in the right direction.
hundreds of years ago. It has since relevant material previously published
developed into a very important legal by Gard. The law on bills of lading is not static
document, evidencing the carriers and changes may affect any guidance
receipt of the goods, the terms of the As an Appendix to this compilation, provided in the material contained
contract of carriage and the right to you will also find a copy of the contents within this compilation. If in doubt or
possession of the goods. With this page of Gards Guidance on Bills of to confirm the current position, Gard is
important role come problems; one of Lading publication. The purpose of that always on hand to assist.

Gard AS, March 2011


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English law - Switching


Gard News 201,
February/April 2011

bills of lading

When a carrier receives a request to replacement naming the new buyer as the declarations may not have been
substitute the original set of bills of the consignee. obtained as easily, particularly the
lading with a new set he should be declaration that only Yekalon had the
aware of the risks involved. A recent Buyer commences proceedings right to re-direct delivery or to cancel
English case considers some aspects of against the carrier the waybill, in circumstances where the
this problem. Buyer Sonaec later commenced court waybill named B & D Co Ltd as acting
proceedings against carrier Maersk in for the account of two entities with
A recent case1 in the English High Benin, claiming that they were entitled opposing interests.
Court is one of very few on the not so to possession of the cargo. The Benin
uncommon practice of switching bills of court made an interim ruling in favour It may be of note that the judge
lading, that is, substituting the original of Sonaec requiring Maersk to ship appears to have been somewhat
set of bills with a new set. the cargo to Sonaec and imposing a uncomfortable with the lack of evidence
daily fine on Maersk of USD 4,800 until provided in the English proceedings,
Background it complied. This was despite Maersk both as to Maersks knowledge of
Yekalon Industry Inc (Yekalon), a having challenged the Benin courts certain documents that may have
Chinese company, was a seller of jurisdiction (the waybill contained an evidenced B & D Co Ltds taking over
30 containers of tiles to Sonaec SA exclusive English law and jurisdiction of the goods for the account of Sonaec
(Sonaec), with the goods being shipped clause) and also disputing that Sonaec (referred to in the written response from
on Maersks liner service through no longer had title to sue since the Sonaec to the English proceedings)
local agents High Goal Logistics GD waybill had been cancelled. and Yekalons evidence in the Chinese
Ltd (High Goal). The bill of lading, proceedings that they were the owner
which was later treated by the English The carrier seeks relief from the and shipper.
courts as a waybill (and which term English High Court
will be used in this article for the Having failed to persuade the Benin It is not clear whether Sonaec made any
sake of clarity), named Sonaec as court, Maersk sought a declaration from attempt to challenge the Chinese court
consignee and the shipper(s) as B & D the English High Court that Sonaec decision or what effect the English court
Co Ltd P/C (pour compte de) Vernal must submit its dispute to the latter declarations had in the case overall.
Investment (Vernal) & Yekalon. Vernal courts jurisdiction and that Sonaec
is a subsidiary or associate company no longer had title to sue under the Conclusion
of Sonaec. The consignee was Sonaec waybill. The High Court granted both The case highlights the importance of
Villas in Cotonou, Benin. The notify declarations to Maersk and in reaching making clear who the shipper is in a bill,
party was Vernal P/C Sonaec Villas. The its decision the court had to tackle whether it is a waybill or bill of lading.
containers were to be loaded in China some difficult questions: was Sonaec a If this is unclear, problems are likely to
for discharge in Benin. party to the waybill and was Sonaec still be encountered should the shipper
bound by the exclusive English law and request the carrier to re-direct delivery
Seller not paid jurisdiction clause after the waybill had or issue replacement bills. The case
Shortly after the waybill had been been surrendered? also serves to stress the importance of
issued (it remains unclear whether the establishing the proper party entitled to
containers were in fact shipped), seller The courts answer to both questions make such a request.
Yekalon claimed that it had not been was yes, but the question of whether
paid by buyer/consignee Sonaec and the surrender of the waybill brought to There are other risks associated with
asked agent High Goal for the waybill. an end the rights of Sonaec was more switching bills, which are beyond
High Goal refused on the grounds difficult. This was because the waybill the scope of this article. At the very
that it had not received instructions stated that B & D Co Ltd acted on least the carrier should ensure that all
from B & D Co Ltd acting on account account of two entities, one of which original bills of the first set issued are
of the shippers. Yekalon applied to was seller Yekalon and the other of surrendered before a new set is issued.
the Chinese courts and obtained a which was Vernal, a subsidiary of buyer If there is a request to change any
declaration that Yekalon was entitled to Sonaec. The court was ultimately details in the bills then advice should be
possession of the waybill. persuaded by the Chinese court order sought before this is agreed.
to deliver the waybill to Yekalon,
Switched bills therefore giving Yekalon the right to re- Footnotes
On declaring that they had still direct delivery or to cancel the waybill. 1 A.P. Moller-Maersk A/S (trading as
not been paid by Sonaec, Yekalon Maersk Line). v Sonaec Villas Cen Sad
surrendered the original waybills to Comment Fadoul [2010] EWHC 355 (Comm).
Maersk and requested a new bill issued Although Sonaec had submitted
to the order of Yekalon (which, being a written response to the English
to order, would make it a bill of proceedings, it was not supported
lading). Yekalon subsequently found a by a statement of truth, and Sonaec
new buyer and then surrendered the did not appear in the English court
replacement bill of lading for a second proceedings. Had they done so,

Gard AS, March 2011


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Egyptian law - Bill of Gard News 197,


February/April 2010

lading reservations
upheld
A landmark judgment has been at the rate of five per cent per annum the 3,300 bags of PVC granules were
issued by the Supreme Court in Egypt and costs. Carriers then appealed to inside the containers at the time they
upholding for the first time ever a the Supreme Court. were loaded on board the vessel, which
defence based on reservations made by shippers were unable to do.
the carrier on a bill of lading. Appeal to the Supreme Court
The appeal was based on evidence Conclusion
Facts that the containers in question had This is an unprecedented judgment
A cargo of five containers said to not been weighed at the loading port. in Egypt, which may not only have an
contain 3,300 bags of PVC granules In addition, on arrival at Alexandria effect on fraudulent cases of empty
was shipped on board a vessel from the containers seals were found containers being shipped as loaded
Busan, Korea to Egypt in 2004. Upon to be intact without any sign of with cargo, but may also apply to partial
the vessels arrival at Alexandria tampering. The Court of Appeal had shortages of containerised cargo and
the containers were all found to be failed to address these crucial facts. other modes of carriage.
empty. The Egyptian receivers filed Furthermore, the following disclaimer
a lawsuit against the carrier seeking appeared on the front side of the We thank Mr Ahmed Metwally, of Eldib
compensation for the non-delivery of relevant bill of lading: Pandi, Egypt, for the above information.
the cargo.
Above particulars furnished by
In 2007, a first instance court rejected shippers, but without responsibility of
the receivers claim and allowed the or representation by carrier.
defence presented on behalf of the Shippers load, stow, weight and
carriers (that the containers had not count.
been weighed at the loading port and
had seals intact at discharge). The The Supreme Court held that the
receivers filed an appeal and in 2008 above clauses in the bill of lading
the Court of Appeal reversed the first should have a binding effect on the
instance judgment and held the carrier parties to the contract of carriage, so
responsible to pay compensation for in order to succeed with their claim the
non-delivery of the cargo plus interest shippers had to provide evidence that

Gard AS, March 2011


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Spanish law Validity of


Gard News 194,
May/July 2009

jurisdiction clause in a bill


of lading
The Spanish Supreme Court has The arguments claim for damage and were bound by
recently ruled on the validity of a Cargo interests commenced the jurisdiction clause as well.
jurisdiction clause in a bill of lading. proceedings before the First Instance
Court in Spain against a carrier for Furthermore, in accordance with
Regulatory background damage to cargo carried under a bill of existing case law, the court considered
On 1st March 2002, EU Council lading. The carrier, relying on a printed the clause in the context of the
Regulation 44/2001 came into force clause in bold letters on the front of the maritime trade, where the parties
across the EU with the aim of unifying bill of lading that referred to the English consent to the jurisdiction clause is
the recognition and enforcement of courts, challenged the jurisdiction of presumed to exist where their conduct
judgments in civil and commercial the Spanish courts and maintained the is consistent with a usage which
matters, replacing the 1968 Brussels exclusive jurisdiction of the courts in governs the area of international trade
Convention on jurisdiction and London. Cargo interests alleged that or commerce in which they operate
enforcement of judgments in civil and the clause was not applicable, as it and of which they are, or ought to have
commercial matters (the Convention).1 did not comply with the requirements been, aware.
The decision reported in this article of Article 17 of the Convention. In
was given against the background of particular, cargo interests alleged that Conclusion
the 1968 Convention, as Regulation they had not signed the bill of lading A jurisdiction clause on the front of a bill
44/2001 was not in force at the time the and that they were not involved in the of lading will satisfy the requirements
suit was originally filed. Nevertheless, carriage of goods by sea. of Article 17 of the Convention and
the specific Convention provisions on bind the parties despite the absence of
which the decision is based have been Therefore the question to be signature.
essentially reproduced in Regulation considered by the Spanish courts
44/2001, so that the result will most was whether the clause on the front This decision of the Spanish Supreme
probably be the same for cases brought of the bill of lading constituted a Court is a welcome extension to the line
under the Regulation.2 valid agreement on jurisdiction in of judgments under the Convention/
accordance with the requirements laid Regulation 44/2001 holding jurisdiction
Article 17 of the Convention states down in Article 17 of the Convention. clauses valid. The conclusion that a
that if the parties to a dispute, one custom of the trade exists regarding
or more of whom is domiciled in a The First Instance Court and the Court the inclusion of jurisdiction clauses
contracting state, have agreed that of Appeal ruled in favour of the carrier. into bills of lading mirrors that of the
a court or the courts of a contracting The cargo owner appealed to the Supreme Court of at least another EU
state are to have jurisdiction to settle Supreme Court. state3 and is also a very positive legal
any disputes which have arisen or which development.
may arise in connection with a particular The Supreme Court decision
legal relationship, that court or those The Supreme Court confirmed the First
courts shall have exclusive jurisdiction. Instance Court and Court of Appeal
Article 17 also lays down the formal decisions and upheld the validity of the
requirements of such jurisdiction jurisdiction clause in the bill of lading.
agreements: (a) they must be in writing The court found that:
or evidenced in writing, or (b) in a form The absence of the cargo interests
which accords with practices which signature on the bill of lading could not
the parties have established between mean that they had not accepted the
themselves, or (c) in international trade conditions of carriage. The jurisdiction
or commerce, in a form which accords clause was clear and was printed in bold
with a usage of which the parties are or letters on the front of the bill of lading.
ought to have been aware and which Signature is only a means of expressing
in such trade or commerce is widely an agreement. Moreover, it is accepted
known to, and regularly observed by, that a party can give consent through
parties to contracts of the type involved lack of response or silence.
in the particular trade or commerce Cargo interests were relying on the
concerned. terms of the bill of lading to pursue the

1 See article Recognition and enforcement of judgments in the EU in Gard News issue No. 169.
2 The relevant provisions are found in Article 17 a), b) and c) of the Convention, which have been incorporated into Article 23 of the Regulation.
Although the caput of the articles have slightly different wordings, paragraphs a), b) and c) are identical.
3 See also article Identity of carrier and jurisdiction clauses in Germany in Gard News issue No. 186.

Gard AS, March 2011


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Fake CONGENBILLS
Gard News 187,
August/October 2007

Members should be aware that there the York-Antwerp Rules 1994 and the the 1994 version of the Rules as the
are fake CONGENBILLS in circulation, fake CONGENBILL 2004 ostensibly most updated and representing their
which differ from the authorised version incorporating the York-Antwerp Rules best interests.
in key aspects. 2004.
A supplementary point which may
Gard News would like to remind The background to this issue is that the be of interest relates to whether the
members and clients of the warning 2004 version of the York-Antwerp Rules 2004 version of the Rules can be
issued by BIMCO in relation to fake is considered by several shipowner/ considered as an amendment to the
CONGENBILLs which are in circulation operator organisations (in particular 1994 Rules. This point arises because
in the market.1 BIMCO has received BIMCO and the International Chamber charterparties and bills of lading often
many enquiries, as has Gard, regarding of Shipping) to be less advantageous incorporate the term 1994 Rules or
bills entitled CONGENBILL 2004, to their members than is the 1994 any subsequent amendments. It
when in fact the latest edition of version, and these organisations advise was agreed at the CMI Conference in
the CONGENBILL was issued by against the use of the 2004 version in Vancouver in 2004, at which the 2004
BIMCO in 1994. The fake version of charterparties and bills of lading. version of the Rules were finalised,
the CONGENBILL differs from the that this version of the Rules was not
authorised version in two key respects: In particular, the 2004 version of the an amendment or modification of the
York-Antwerp Rules disallows salvage 1994 Rules, but rather was a completely
a) The General Average clause expenses, which is a departure from new set of Rules. Thus where contracts
incorporates the York-Antwerp Rules several preceding versions of the of affreightment such as CONGENBILL
2004. York-Antwerp Rules. It should also be 1994 refer to the York-Antwerp Rules
b) The both-to-blame collision clause is noted that the York-Antwerp Rules are 1994 or any subsequent modification
misprinted. not a convention and only take effect thereof the 1994 Rules still will apply.
by being incorporated into individual
Since CONGENBILLs are specifically contracts of affreightment, and earlier Footnotes
designed for use with corresponding versions of the York-Antwerp Rules 1 See www.bimco.org/Members%20Area/News/
BIMCO charterparties, a potential are often still incorporated into many General_News/2006/11/1120-Warning%20
dispute could arise in respect of a contracts of affreightment. Gard Fraudulent%20CONGENBILL.aspx .
conflict between a BIMCO charterparty recommends that where possible
whose standard terms incorporate members and clients try to incorporate

Gard AS, March 2011


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UCP 600 - How the new rules Gard News 187,


August/October 2007

on documentary credits may


affect contracts of carriage
The ICCs new rules on documentary bank, one of the potential addressees transport bills, the place of final
credits are now in force and could which anyone issuing a bill of lading destination (as stated in the credit) must
give rise to some confusion and must have in mind, would accept it also be indicated in the bill of lading.6
complications for carriers.1 as meaning that the person named
on the front as the carrier was indeed For the three types of bill of lading,
Introduction the carrier. And the reasonable reader authentication of the bill, required by
The financing of the international sale will not think that the bill of lading the previous UCP 500, is now removed,
of goods is largely based on letters of could have been intended to have one as Article 3 of UCP 600 provides
credit, which are issued by a bank and meaning to a bank and another to a that a document may be signed by
are an undertaking to make a specified consignee or assignee. handwriting, facsimile signature,
payment to a beneficiary provided that perforated signature, stamp, symbol
the terms of the letter of credit are The most relevant UCP articles to those or any other method of mechanical or
complied with. The benefit of a letter involved in the transportation of goods electronic authentication.
of credit sale is that, via the banks, the are the ones dealing with transport
seller secures his money after parting documents and it is important to be Liner bills of lading
with the goods (by handing them to aware of the provisions. We will briefly Article 20 is of great relevance to liner
the carrier) and the buyer secures rights consider here the main aspects and bills which will often cover containerised
to the goods before parting with his changes involving those articles most or unitised goods. It still requires:
money, with all this being done on relevant to transportation by sea. It is an indication of the name of the
the basis of an exchange of compliant apparent that the new articles could give carrier; and
documents. Since the banks themselves rise to confusion as to the identity of the signature by the carrier or a named
are financially exposed, they will contractual carrier and complications for agent for or on behalf of the carrier; or
exercise great care in ensuring that the carriage of cargo on deck. signature by the master or a named
sale documents, including the bill of agent for or on behalf of the master.
lading, comply with the letter of credit. Bills of lading General
Many letters of credit are governed UCP continues to differentiate between Under UCP 600 the masters name need
by the Uniform Customs and Practice what might be regarded as liner bills, no longer appear on the bill. There
for Documentary Credits2 (UCP), a charterparty bills and multimodal bills.5 does, however, remain a requirement
set of standard rules and practices that any signature by the carrier, master
on the issuance and use of letters of In the case of liner and charterparty bills or agent be identified as that of the
credit, which will often be voluntarily of lading it remains a requirement for carrier, master or agent and that any
incorporated into the sales contract and both types to indicate that the goods signature by an agent must indicate
which will largely determine whether have been shipped on board a named whether the agent has signed for or on
sale documents, including the bill of vessel on a given date and at the port behalf of the carrier or for or on behalf
lading, comply with the letter of credit. of loading stated in the credit. The date of the master.
A new version of the rules, UCP 600, of issuance of the bill will be deemed
was approved in October 2006 and to be the date of shipment unless the The position concerning transhipment
came into force on 1st July 2007.3 bill contains an on-board notation (unloading from one vessel and
indicating the date of shipment, in reloading to another vessel during
The importance of UCP can be which case the date stated in that the carriage) does not appear to have
demonstrated by the comments of Lord notation will be deemed the date of changed much from UCP 500. Liberty
Hoffman in the STARSIN, a recent and shipment. In the case of multimodal clauses, which give a carrier the right to
relevant case in the House of Lords.4 bills, similar requirements remain in tranship, continue to be disregarded7
He said: place as for other types of bill, but the by the banks (this is now explicit under
Since it is common general knowledge relevant date is (as it was under UCP UCP 600). Like UCP 500 did, UCP 600
that banks almost invariably issue letters 500) the date the goods have been will allow a bill indicating that the goods
of credit on the terms of UCP 500, those dispatched, taken in charge or shipped will or may be transhipped, provided
terms will be part of the background on board at a place stated in the credit. the entire carriage is covered by one
available to the reasonable reader It also remains the case with UCP 600 and the same bill. A bill indicating that
seeking to ascertain the meaning of that shipment to the port of discharge, transhipment will or may take place is
the bill of lading. He will know that a or in the case of multimodal/combined also acceptable under UCP 600, even if

1 See article UCP 600 in Gard News issue No. 186.


2 Published by the International Chamber of Commerce (ICC).
3 Copies of UCP 600 are available from the various ICC book shops or from www.iccbookshop.com/details.php?id=189.
4 The STARSIN [2003] 2 W.L.R 711 HL.
5 For non-negotiable sea waybills see further below.
6 There are finer details with these provisions, e.g., where intended ports or places are indicated or, in the case of a charterparty bill, where a range of
discharge ports is indicated, but it is not proposed to go into those details here.

Gard AS, March 2011


11
the credit prohibits transhipment, but Comment complications could also arise with
only if the goods have been shipped Article 20 may increase the scope demands for security for a claim against
in a container, trailer or lash barge as for confusion over the identity of the charterer in addition to the owner.
evidenced by the bill. the contractual carrier. UCP 600 now
permits signature by or for/on behalf The law of the United States is quite
Multimodal bills of lading of the charterer. For example, if in different. According to United States
Article 19 applies to multimodal or accordance with UCP 600 a typical law, the vessel in rem, the owner
combined transport documents, however form of bill of lading (to be used with in personam, and the charterer in
named.8 It replaces Article 26 of UCP a charterparty) were signed by or personam would probably all be
500. The reference in Article 26 of UCP for the charterer without naming the considered carriers regardless of who
500 to multimodal transport operator carrier, who would be identified by that has signed the bill. The vessel would
is now replaced simply with carrier. bill as the contractual carrier? Under be deemed to have ratified the bill of
The signature provisions therefore read English law the bill as a whole would be lading when she sailed with the bill
the same as those for bills of lading considered, not just the signature, so of lading cargo on board. The vessel
under Article 20. The position regarding in the example given, how would one in rem would also be bound by a
transhipment is also similar to Article 20, reconcile the signature with the printed signature on behalf of the master in
with logical differences to cover different words so often seen in the attestation the bill of lading. The owner would be
modes of transport. clause of a typical form of bill of lading deemed to be the carrier if it issued
(to be used with a charterparty) which the bill of lading or if it authorised the
Comment read in witness whereof the master charterer to issue a bill of lading. The
If the bill identifies as carrier somebody has signed...? Arguably, those printed charterer would be liable if it issued
other than the vessel owner or demise words could be said to be irrelevant the bill of lading. There are certain
charterer, potential confusion could in the example given, because the exceptions to these general rules, but
arise in some jurisdictions as to the master has not signed the charterer a shipowner and charterer would be
identity of the contractual carrier if the has signed and has done so on his wise to assume that the vessel, the
master signs the bill or an agent signs own behalf. There is English case law owner and the charterer would all be
for the master. Would the contractual which suggests that an owners form of considered carriers. If the claimant were
carrier be deemed to be the named bill which contains nothing to suggest to name the wrong entity as the carrier,
carrier or, by virtue of the masters that the charterers signed as agents United States courts would freely
signature, the vessel owner/demise for the master or owners makes that grant leave to amend a complaint to
charterer?9 To avoid such confusion it bill a charterers bill.10 There is also include the correct carrier. If the correct
would be preferable that the carrier English case law which suggests that if carrier would not be prejudiced by the
signed the bill as carrier or an agent did the charterer signs a bill containing the amendment, the amendment would
so on behalf of the carrier. words signed for the master then the relate back to the time the original
bill would be an owners bill.11 complaint was filed, thus preventing a
As for transhipment, it remains a little time bar argument.
unclear whether banks will accept The English courts will give effect to an
a transhipment bill covering goods express statement identifying the carrier Given the scope for confusion it is
which are not in a container, trailer providing it is clear and unambiguous.12 recommended that:
or lash barge, where transhipment is Therefore, if in the example given Although for charterparty bills UCP
prohibited under the credit. above the typical form of bill of 600 does not require the carrier to
lading (to be used with a charterparty) be identified for documentary credit
Charterparty bills of lading were signed for the charterer Bulk purposes, conflicting provisions in
Article 22 deals with charterparty bills, Chartering Ltd the carrier that would, the bill as to the identity of the carrier
which often cover bulk cargoes. As under English law, be taken to be a should be avoided. If the owners and
in UCP 500, the significant difference clear and unambiguous identification of charterers agree that the charterers
between this article and Article 20 is Bulk Chartering Ltd as the contractual are to be the contractual carrier, then
that charterparty bills are not required carrier regardless of pre-printed terms in addition to signature by or for the
to name the carrier. UCP 600 will and conditions. charterers, a clear and unambiguous
require: identification of charterers as the carrier
signature by the master or a named If the contractual carrier is not made is recommended.
agent for or on behalf of the master; or clear in the bill of lading13 and That owners only permit charterers
signature by the owner or a named the owner is found not to be the to issue bills in their own name or
agent for or on behalf of the owner; or contractual carrier, that could result in as carrier if the bill contains a clear
signature by the charterer or a named him being exposed to a claim in tort, and unambiguous identification of
agent for or on behalf of the charterer. possibly with no contractual defences charterers as carrier and incorporates a
or limitations. Under English law owners suitably drafted Himalaya clause giving
The significant change from UCP 500 is may be able to rely on the terms of the owners the benefit of the bill of lading
found in the last bullet point, which is a bill as bailees. However, the same may terms and conditions and/or protection
new provision. There is also a requirement not be the case in other jurisdictions from claims in tort by third parties.
that any signature by the master, owner, where a ship may be targeted. Many That charterers take care to avoid
charterer or agent be identified as that of typical forms of bill of lading (to be themselves being identified as carrier
the master, owner, charterer or agent and used with a charterparty) and the under a bill which they may not intend
that any signature by an agent on behalf relevant charterparties themselves do to be. Simple signature by or for the
of the owner or charterer must indicate not contain a Himalaya clause giving charterers on a typical form of bill of
the name of the owner or charterer. The owners the benefit of the bill of lading lading (to be used with a charterparty)
other notable change from UCP 500 is that terms and conditions and/or protection which does not contain a clear and
the port of discharge may now be shown from claims in tort by third parties. unambiguous identification of the
as a range of ports or a geographical carrier could be interpreted in some
range, as stated in the credit. If the identity of the carrier is unclear jurisdictions to be a charterers bill or
and the charterer has signed the bill, indeed a bill under which both owners

Gard AS, March 2011


12
and charterers are deemed contractual 600 and the bills are claused on deck, it clearer that the word clean need
carriers. even if the parties have agreed to not appear on a transport document,
That owners and charterers seek to on deck bills in their letter of credit. even if a credit has a requirement for
expressly agree in the charterparty how However, there are provisions in Articles the transport document to be clean on
bills are to be issued, following up with 1 and 2 of UCP 600 which suggest that board.
clear instructions to the master/agents the parties to the letter of credit do
to check that bills are being issued have scope to agree terms that differ Freight
correctly once signed. from the UCP rules and that the terms Under UCP 600 there is no equivalent
of the credit will take precedence over of Article 33 under UCP 500, which
Non-negotiable sea waybill those rules. If the bank is unsure as to provided that banks would accept
As in UCP 500, UCP 600 has a separate the position, this may result in pressure transport documents stating that freight
article (Article 21) dealing with non- on carriers to issue bills which do not has still to be paid. This implies that
negotiable sea waybills. This is now indicate that the goods are carried on the banks will no longer bother with
similarly worded to the new bill of deck when in fact the goods are carried provisions regarding freight.16
lading article (Article 20) insofar as on deck. If carriers agree to this, they
concerns signature and indication that may prejudice their P&I cover. This is Conclusion
the goods have been shipped on board because the absence of a statement At the time of going to press the new
a named vessel on a given date and at in the bill that the goods are shipped edition of the International Standard
a port of loading stated in the credit. on deck risks a finding that the deck Banking Practice for the Examination of
There is no longer a transhipment carriage has been unauthorised. The Documents under Documentary Credits
provision for sea waybills. potential consequences of such a (ISBP) was published. The ISBP is the
finding are the loss of the carriers companion document to UCP and may
On deck, Shippers load and defences and limitations of liability, well assist in clarifying how the banks will
count which would prejudice P&I cover. Under interpret the changes under UCP 600.
It remains the case with UCP 600 English law a general liberty to carry
(Article 26) that a transport document goods on deck (which is acceptable It is somewhat ironic that the House
must not indicate that the goods are under UCP 600) is simply that a of Lords in the STARSIN used UCP
or will be loaded on deck. A clause liberty, or an option (available to the 500 to help them clarify the identity
stating that the goods may be loaded carrier) and on its own is insufficient of the carrier in a case concerning a
on deck remains acceptable. However, to authorise deck carriage,14 since liner bill and that UCP 600 has the
the words unless otherwise stipulated a third party transferee of the bill of potential to make matters unclear as far
in the Credit, which appeared in UCP lading would not be able to ascertain as charterparty bills are concerned. A
500, have been omitted from UCP whether the liberty had been exercised further comment from Lord Hobhouse
600, which suggests that under UCP or not.15 Unless there is an established in the STARSIN suggests that UCP
600 the parties may not agree in their custom of the trade, it is recommended 600 has a lot to live up to: the current
letter of credit that bills of lading are to that the carrier strongly resists any version of the code (UCP 500) has made
expressly state that the cargo is to be pressure to issue bills which do not significant changes to the previous
carried on deck. The same article also expressly state that that the goods are versions and among other things,
reconfirms that a transport document carried on deck when in fact they are requires that the actual identity of
bearing a clause such as shippers load carried on deck. the carrier should be disclosed and
and count and said by the shipper to particularized by naming it or him on
contain is acceptable. Clean transport document the face of the bill of ladingAll this is
It remains the case with UCP 600 a worthy aspiration.
Comment (Article 27) that a bank will only accept
The removal of the words unless a clean transport document, which is We are grateful to Professor Charles
otherwise stipulated in the Credit with defined as one bearing no clause or Debattista, of Stone Chambers in
regard to the acceptance of on deck notation expressly declaring a defective Grays Inn and of the University of
bills would appear to create a problem condition of the goods or their Southampton, for his assistance in the
if the letter of credit is subject to UCP packaging. The same article now makes preparation of this article.

7 In other words, the presence of a liberty clause will not make the bill a non-compliant document under UCP even if transhipment is prohibited by the
letter of credit.
8 The fact that this article is now the first transport article under UCP indicates that the banks are seeing many more bills covering such transport.
9 See for example the articles Whose bill of lading is it anyway? Gard News issue No. 162 and Identity of the carrier The House of Lords decides in
Gard News issue No. 170.
10 THE OKEHAMPTON [1913] P. 173 at p. 180, in which the judge commented The Court must of course construe the whole instrument before it in
its factual context, and cannot ignore the terms of the contract. But it must seek to give effect to the contract as intended, so as not to frustrate the
reasonable expectations of businessmen. If an obviously inappropriate form is used, its language must be adapted to apply to the particular case.
11 The REWIA [1991] 2 Lloyds Rep. 325, in which the judge commented that a bill of lading signed for the master cannot be a charterers bill unless the
contract was made with the charterers alone, and the person signing has the authority to sign, and does sign, on behalf of the charterers and not the
owners.
12 The STARSIN [2003] 2 W.L.R 711 H.L
13 In which case a claimant may have other, although less certain, avenues of claim: against the owner in contract and/or tort/bailment and/or against
the charterer in contract.
14 See Svenska Tractor v. Maritime Agencies (1953) 2 Q.B. 295 and the article Deck Cargo A Summary of English and US Law in Gard News issue
No.145.
15 However, the absence of a statement in the bill that the goods are shipped on deck should not matter where there is a custom of the trade or port of
loading to stow the specific goods on deck for the voyage in question. For instance, carriage of enclosed containers on decks of purpose-built container
ships is almost universally regarded as a customary method of carriage. Belgium, however, is an exception see the article Belgium Carriage
of containers on deck in Gard News issue No. 162. Similarly, the carriage of logs on deck of purpose-built log-carrying vessels is also accepted as
customary.
16 Article 26 of UCP 600 states that a transport document may bear a reference to charges additional to the freight.

Gard AS, March 2011


13

Identity of carrier and


Gard News 186,
May/July 2007

jurisdiction clauses in
Germany
The German Supreme Court has enforcement of judgments in civil and meant that the English courts had
recently held an identity of carrier commercial matters (the Regulation), jurisdiction and that English law would
clause invalid. the German courts would have apply to the case.
jurisdiction, as the defendants seat is
The facts within Germany, unless the parties had In order, however, to decide on the
A German-owned vessel was chartered derogated from this general rule in jurisdiction of the German courts
to an English company which in turn accordance with article 23 paragraph 1 despite article 2 of the Regulation, it
contracted with another English of the Regulation. The question thus to had to be further ascertained whether
company for the carriage of 560 steel be considered was whether the clauses or not the jurisdiction agreement in
tubes from the UK to Sweden. The in the bill of lading constituted such an clause 3 of the bill of lading was binding
receiver of the tubes under the bill of agreement. on the parties. This question was to be
lading claimed that 114 of the tubes decided in autonomous interpretation
arrived in damaged condition. The The first question was which law was to of article 23 paragraph 1, 3rd sentence
bill of lading, which was signed by the be applied to the case. Difficulties arose of the Regulation. For all questions not
master, named the English charterers from the combination of the jurisdiction ruled by the Regulation, English law was
as carriers and contained the following clause and the identity of carrier clause. to be applied.
printed clauses: The question of the applicable law
turned on the validity of the identity of The court then held that the existence
3. Jurisdiction carrier clause. And in the view of the of choice of law and choice of
Any dispute arising under this Bill of court the validity of this clause had to jurisdiction clauses in a bill of lading
Lading shall be decided in the country be judged by the law which applied was a widely known custom of the trade
where the carrier has his principal according to the jurisdiction clause. in international maritime trade and
place of business, and the law of such In order to solve this circle, the court that therefore the formal requirements
country shall apply except as provided resorted to the principle of German of article 23 of the Regulation were
elsewhere herein ... conflict of law rules according to which fulfilled.
the applicable law would be that
17. Identity of Carrier which would apply if the identity of The court then held that the receiver of
The contract evidenced by this Bill carrier clause were indeed valid. If the the goods claiming under the terms of
of Lading is between the Merchant clause were valid, the German owner the bill of lading accepts the choice of
and the Owner of the vessel named would be treated as the carrier and jurisdiction based on this trade usage
herein (or substitute) and it is therefore therefore German law would be applied (custom of the trade). Consequently, the
agreed that said Shipowner only shall regarding the validity of the identity of claimant was bound by the jurisdiction
be liable for any damage or loss due to carrier clause. clause.
any breach or non-performance of any
obligation arising out of the contract of The court then found that the written Nevertheless, the court found that,
carriage whether or not relating to the additions to the bill of lading, namely based on the findings of the lower
vessels seaworthiness ... that the English charterers were courts, it could not be said that the
named as the carrier, conflicted with shipowner had accepted the clause
Suit was filed against the shipowners the identity of carrier clause. Since in the same way. The owner neither
before the German courts. Both the the printed clauses of a bill of lading succeeded to rights under the bill of
courts of first and second instance are deemed under German law to lading nor did he consent to its terms
found that the German courts had be general terms and conditions, the after the bill of lading was issued.
no jurisdiction to hear the case. The individual agreement regarding the However, the question now to be
Supreme Court left this question to identity of the carrier would prevail decided and ascertained by the court
be answered by the court of second over the general (printed) terms. The of second instance was whether the
instance by referring the matter back court held that naming the charterers defendant owner was, maybe by a
to that court. However, in doing so as carrier on the face of the bill of custom of the trade, involved in the
the German Supreme Court set out a lading was an individual agreement. As underlying agreement.
number of considerations which are of a consequence, the identity of carrier
wider interest. clause was held to be invalid and the Since this question could not be
carrier was held to be the charterers determined based on the findings of
Legal considerations with their seat in England. In this regard the lower courts, it was referred back to
The German Supreme Courts decision the court referred to the judgement of the appeal court.
sets out from the premise that, based the House of Lords in The STARSIN.1
on EU Council Regulation 44/2001 on It followed that if the identity of carrier Comments
jurisdiction and the recognition and clause was invalid the jurisdiction clause With this decision the German

1 [2003] 1 Lloyds Report 571.

Gard AS, March 2011


14
Supreme Court has extended its line of of jurisdiction clauses into bills of of English law, which, according to the
judgments holding identity of carrier lading is new and conforms with the findings of the Supreme Court, rule any
clauses invalid in cases where the bill understanding of learned scholars. aspects left open by the Regulation.
of lading clearly names a charterer as
carrier on its face. The question of whether or not the We thank Dr. Tobias Eckardt, of Ahlers
defendant is bound by the jurisdiction & Vogel, Hamburg, for the above
The finding that a custom of the clause will have to be considered by the information.
trade exists regarding the inclusion appellate court based on the principles

Chinese court applies


Gard News 182,
May/July 2006

US law in straight bill of


lading case
Chinese court finds that US law applies a Chinese shipper, who had not been bill of lading to the named consignee
to case by force of contract and that as paid for the goods by the consignee. without surrender of the original bill,
a result cargo can be delivered without The shipper sought to recover his unless he has notice from the shipper
production of an original straight bill of loss by claiming in tort against the or another party claiming to have title
lading. carrier who had delivered the cargo to the goods demanding that the
to the consignee in Canada without goods not be delivered to the named
An article in Gard News issue No. 1761 production of the original bill. The bill consignee.2
drew readers attention to a decision expressly provided for US law to apply
of the Chinese judiciary that in future and the court held (upheld on appeal) This recent decision of the Chinese
cases where the Maritime Code of the as follows: courts is a welcome one for carriers,
Peoples Republic of China (PRC) was The claim in respect of delivery of not just because the carrier avoided
applicable, the Chinese courts should cargo without production of the original liability, but because the court was
adopt the principle that cargo carried bill was a contractual one and could not willing to apply the contractually agreed
under bills of lading, including straight be advanced in tort. law. Unfortunately, a carrier can not
bills, should only be delivered against The shipper and carrier had voluntarily be certain that will always be the case
production of the original bill. That agreed to apply US law and such an and where straight bills, as opposed to
decision, however, is relevant to cases agreement was lawful and effective it waybills, are used the carrier would be
where Chinese law applies, and in a did not violate public interest of the advised to exercise extreme caution
recent case the Chinese courts held PRC. before delivering cargo without
that US law applied, which resulted Proof of the relevant US law had been production of the original bill.3
in the carrier avoiding liability for ascertained in previous civil judgments
delivering cargo without production of of the Chinese courts. We are grateful to Messrs Wang Jing
a straight bill. & Co., Law Firm, Guangzhou, for
With regard to the last point, US law reporting the above case.
The subject case, before the permits the carrier to deliver goods
Guangzhou Maritime Court, involved covered by a non-negotiable (straight)

1 Delivery of cargo carried under straight bills of lading Developments in China.


2 See article Straight bills of lading Not so straightforward in Gard News issue No. 169.
3 See article Rules apply to straight bills House of Lords decides RAFAELA S in Gard News issue No. 178.

Gard AS, March 2011


15

Hong Kong law - Straight


Gard News 185,
February/April 2007

bills of lading

The Hong Kong Commercial Court has that such a clause did not impose upon However, the defendant carrier
recently had to consider the nature of the carrier the contractual obligation succeeded in his defence on a different
straight bills of lading. to deliver the goods upon production ground. He was able to rely on an
of an original bill of lading and that the exemption clause on the bill of lading
Straight bills usual presentation rule in to order to exclude liabilities after discharge of
A straight bill of lading is a bill of lading bills of lading should not apply to the goods.
which bears the name of the consignee, straight bills.
as opposed to the so-called to order Appeal
bill of lading. The decision These two Hong Kong cases are now
The Hong Kong Court (Stone J) under appeal. If the higher court
An article in Gard News issue No. 178 disagreed and relied on the previous reaches a different decision on the main
reviewed the position of straight bill English authority of the RAFAELA S and issues then Gard News will let readers
of lading under English law in light of the Singapore Court of Appeal decision know. Any readers who are interested
the House of Lords decision in the in Voss v APL.3 The court thought can refer to the Hong Kong judgments
RAFAELA S case.1 there should not be one rule for in full at the Hong Kong Department of
order bills and one rule for straight Justice website: http://legalref.judiciary.
It is typical for a bill of lading to contain bills, and emphatically declined the gov.hk/lrs/common/search/search_
an attestation clause: proposition that straight bills should result_detail_frame.jsp?DIS=53439&QS
In witness whereof, the carrier by its be treated as akin to sea waybills. The =%28%24carewins%29&TP=JU.
agents has signed three (3) original Bills Singapore Court in the Voss case had
of Lading all of this tenor and date, one also indicated that the rule requiring
of which being accomplished the others presentation of a straight bill as a pre-
to stand void. One of the Bills of Lading requisite for obtaining delivery had the
must be surrendered duly endorsed advantage of simplicity of application
in exchange for the goods or delivery and certainty, and would prevent
order. confusion and avoid shipowners and
their agents having to decide whether a
This was the case with the RAFAELA S. bill of lading is a straight bill or an order
In Gard News 178, readers were warned bill.
of the potential risk in delivering goods
without presentation of a straight bill It remains to be tested if clearer
containing such an attestation. wording in the contract indicating that
the original bill of lading is not required
Hong Kong to be presented before delivery of
The issue of straight bills of lading has goods will have a different effect to
recently come up in two related actions invalidate the usual presentation rule.
decided by the Commercial Court in
Hong Kong.2

The facts in the two Hong Kong cases


are slightly different from those in the
RAFAELA S, while being identical to
each other in the following aspects. Straight bills under Chinese law
The bills of lading in both actions Readers will recall that the article Delivery of cargo carried under straight
incorporated only the first limb of bills of lading Developments in China in Gard News issue No. 176
the full attestation clause (In witness reported on a decision of the Chinese judiciary that in cases where the
whereof, the carrier by its agents has Maritime Code of the Peoples Republic of China (PRC) was applicable, the
signed three (3) original Bills of Lading Chinese courts should adopt the principle that cargo carried under bills of
all of this tenor and date, one of which lading, including straight bills, should only be delivered against production
being accomplished the others to of the original bill. That decision, however, is relevant to cases where Chinese
stand void) but did not mention that law applies, and in a recent case the Chinese courts held that US law applied,
one of the bills must be surrendered which resulted in the carrier avoiding liability for delivering cargo without
in exchange for the goods. In each production of a straight bill. For further details see article Chinese court
action the defendant carrier argued applies US law in straight bill of lading case in Gard News issue No. 182.

1 MacWilliam Co Inc v The Mediterranean Shipping Co SA [2005] 1 Lloyds Rep 347.


2 Carewins Development (China) Limited v Bright Fortune Shipping Ltd and Carewins Development (China) Limited v Hecny Shipping Limited, HCCL 49 &
50/2004, 27th July 2006.
3 [2002] 2 Lloydss Rep 707. See article Straight bills of lading Not so straightforward in Gard News issue No. 169.

Gard AS, March 2011


16

Early departure Gard News 181,


February/April 2006

procedure via e-mail

A shipowner member has recently unsurprising that, at some stage, their own signature as authorised
brought to Gards attention the practice somebody would think to combine EDP on behalf of the carrier. However,
of early departure procedure via e-mail. and e-mail, particularly given that speed these systems will usually incorporate
is common to both. security arrangements and the point
Early departure procedure (EDP) itself is here is that, with the EDP practice
not new. An article in Gard News issue The master of a vessel insured by Gard described, such arrangements are likely
No. 1501 explained the hazards of the has recently received an e-mail with to be loose to say the least. Hence,
practice, which often involves issuing attached copies of original bills of owners would be advised to refuse to
signed but otherwise blank bill of lading, which except for signature were participate in the practice. It would be
lading forms. Interestingly, the practice completed in all respects, together with much more preferable to only circulate
which is the subject of the article in a request from the agents to sign the the information to be entered on the
Gard News issue No. 150 appears to bills on his behalf. original bill of lading form. If charterers
be an improvement on the pure EDP insist on the practice, owners could
that has been witnessed before, in that The practice of sending any form offer to appoint their own agents at the
the master is, apparently, given the of original bill of lading by e-mail same loading port, so that e-mailing
opportunity to approve/correct the bill can be extremely dangerous given bills would not be necessary.
of lading contents before authorising todays sophistication in fraud. Such
signature. However, it is suspected that a practice is not, however, confined
agreeing any corrections is far from to EDP. Indeed, Gard is aware of the
easy in reality. development of electronic bill of
lading systems, one of which involves
There has been an increase in the made-up original bills of lading
general use of e-mail in the issuing available via the web for shippers
of bills of lading and it is perhaps to print off at their offices, adding

1 Entitled Early departure procedure and bills of lading.

Gard AS, March 2011


17

When can a master


Gard News 180,
November 2005/January 2006

refuse to load damaged


cargo?

Following a recent decision of the shipowners by the charterers of a letter award. The fact that leave to appeal was
English High Court, very clear terms of indemnity (LOI). The first solution is granted suggests that the judge who
must be set out in the charterparty if the one preferred and recommended heard the application thought there
the parties wish to give the master the by Gard. The second is likely to leave were important issues which should be
right to reject damaged cargo before it an owner without P&I cover (see Rule heard by the High Court.
is loaded. 34 1 ix of Gards 2005 Statutes and
Rules) and with little or no defence to The facts
Introduction a claim by an innocent third party for SSM were the owners and AMC the
The question of whether a cargo, damage which should have been noted charterers of the SEA SUCCESS. The
often a cargo of steel products, is in on the bill. vessel was chartered on the well-known
apparent good order and condition New York Produce Exchange form.
and the resulting disagreement as to In Gards experience, it is relatively rare There were several other charterparties
whether the bill of lading should be for a master to refuse to load damaged down the line to various sub-
claused (and if so, in what terms) arises cargo. This usually happens when there charterers, essentially on identical
regularly. Disagreement may arise is a clause in the charterparty which terms. The same arbitrators were
because there is a genuine factual requires the master to sign clean bills appointed under each charterparty
dispute as to the true condition of the of lading, but which allows him to reject and the disputes were dealt with
goods. Alternatively (or sometimes cargo which is in such a condition concurrently.
additionally), for letter of credit reasons, that a clean bill could not be issued.
a shipper will want a clean bill of lading, Nevertheless, this does happen from In September 2004, the vessel was
whereas a master has the right and the time to time and a recent decision of ordered to load a cargo of steel
duty to protect both the shipowner and the English High Court1 provides useful pipes at Constanza, Romania. Having
the future bill of lading holder(s) and guidance on the points which masters, inspected them before loading,
to place remarks on the bill which in owners and charterers should have in the master found the pipes to be
his reasonably-held opinion accurately mind when faced with such a situation. damaged. He refused to load them.
reflect the condition of the goods. Interestingly, this was an appeal by The dispute was resolved by the issue
owners Sea Success Maritime (SSM) to owners of an LOI. The vessel then
Any disagreement is usually resolved by from an award in favour of charterers sailed to Novorossiysk. There, she
discussion between the parties. Either African Maritime Carriers (AMC) by a was instructed to load a cargo of hot
a wording for insertion into the bill by tribunal of London arbitrators. Under rolled steel coils. The same situation
the master is agreed, or a clean bill English law, it is very difficult to obtain arose. The master considered the
is issued against the provision to the leave to appeal against an arbitration coils to be damaged (which in Gards

1 Sea Success Maritime Inc. v. African Maritime Carriers Ltd. [2005] EWHC 1542 (Comm); 15th July 2005.

Gard AS, March 2011


18

experience is not uncommon with such There seems to have been no dispute In answer to the second question, the
cargo) and refused to load them. This between SSM and AMC as to the tribunals answer was no, on the
time, rather than an LOI being issued, actual condition of the cargo at both basis that there was no dispute as to
the parties entered into a without Constanza and Novorossiysk. So the condition of the cargo, nor the
prejudice agreement which resolved far as the Novorossiysk cargo was description of it that would be inserted
the immediate problem. The cargo was concerned, AMC agreed and confirmed in the bills of lading. The tribunal was
then loaded. that the bills of lading would contain no doubt influenced by the fact that
the description of the cargo and its SSM and AMC were essentially in
The basis on which the master condition as set out in the pre-loading agreement as to the proper condition
refused to load the cargo survey report prepared on owners of the cargo. SSM sought leave to
In support of his decision to refuse to behalf. On this basis, AMC said that appeal against these findings and
load the cargo in question, the master the master would not need to clause obtained it. The appeal was heard by
(and SSM) referred to clause 52 of the the bills of lading (because they already the High Court in early July 2005.
charterparty with AMC. This clause contained the surveyors remarks) and
read: thus that he had no good reason to The High Courts findings
The vessel to use Charterers Bills refuse to load the cargo. The judge upheld the tribunals decision
of Lading or Bills of Lading approved and thus found in favour of AMC.
by Charterers and/or sub-Charterers The arbitration Broadly, he approved of the tribunals
which to include Clause Paramount The dispute went to arbitration. It was reasoning. He made the particular point
General, USA or Canadian, as heard by three well-known London that clause 52 (and presumably similar
applicable, during the period of arbitrators. Essentially, they had to clauses) was not intended to be used if
this Charter. Master to authorise, decide two questions: there was no dispute between SSM and
time by time, in writing Charterers 1. In what circumstances, on the AMC as to the condition of the cargo.
or their appointed Agents to sign true construction of clause 52 of the The judge accepted that the clause
Bills of Lading on behalf of Master charterparty, is the master entitled and would operate if the master (correctly)
in accordance with Mates Receipts. obliged to reject the cargo presented intended to clause the bill in relation
Master has the right and must reject any for shipment/tendered for loading? to the condition of the cargo, but the
cargo that are [sic] subject to clausing 2. Did those circumstances exist at shipper did not agree.
of the BS/L. Novorossiysk?
The judge also dealt with what
SSM relied on the last sentence of this In answer to the first question, the he called the timing point. This
clause which, they argued, meant that tribunal decided that the master could/ concerned SSMs argument that it was
the master could and should refuse should reject the cargo ... if the cargo, impractical for a master to try to reject
to load cargo which was in such a once loaded (emphasis added) would cargo once it had been loaded, an
condition that, if it was loaded, the bills be properly described in the bill of argument with which many readers will
of lading would have to be claused. lading in a way which would qualify the have sympathy. Nevertheless, the judge
Effectively they were arguing that only statement of apparent good order and rejected this argument. He concluded
cargo which was in apparent good condition ... proposed to be stated in that, after the initial inspection of the
order and condition could be loaded. the bill of lading by the shipper. cargo (whether by the master or by the

Gard AS, March 2011


19
pre-loading surveyor), the charterers/ reject. If owners, or indeed charterers, Lastly, the judge re-stated what almost
shippers have the opportunity to wish to give the master the right to all practitioners would recognise as
change their intended description of reject damaged cargo before it is being the correct state of affairs in
the cargo in the bill of lading. Thus, loaded, this will have to be set out in such matters. To paraphrase the judge,
he felt, it would be premature for the very clear terms in the charterparty. he said that if the master (or often a
master to reject the cargo at that time. surveyor acting for owners) inspects
If charterers/shippers agreed to the We have mentioned above the position the cargo and reasonably considers
bill being worded in terms acceptable where a clause in the charterparty requires it to be in such a condition that the
to the master, there is no dispute and the master or his agent to sign only clean bill of lading should be claused, the
clause 52 does not operate (see above). bills of lading, but also gives him the parties have a choice. Either the
In the judges view, it was only if the right to reject cargo for which clean bills charterers/shippers agree to the bill
charterers/shippers declined to change can not be issued. Based on this case, it of lading being so claused, in which
their description of the cargo in the seems that such a right to reject may arise case the master can sign it, or give
bill of lading (i.e., refused to allow the only once the cargo has been loaded. It is authority for it to be signed on his
bill to be claused as required by the therefore suggested that owners who are behalf, because he is satisfied that it
master) that clause 52 operated and the asked to accept such a clause stipulate in accurately reflects the condition of the
master was then allowed and required clear terms that the master is entitled to cargo, or the charterers/shippers refuse
to reject the cargo. refuse to load (not merely reject) cargo to themselves clause the bill, in which
for which in his opinion a clean bill could event the master must do so himself.
Because it did not arise here, the judge not be issued.
said nothing as to the masters position In so saying, the judge repeated the
if the charterers/shippers do not reply It is also worth stressing that both the well-known position under English law
to his request that they agree to the tribunal and the judge appear to have that a master has to take what he called
bill(s) of lading being worded in terms been strongly influenced by the fact a ... reasonable, non-expert view of the
acceptable to him. Under English law, that SSM and AMC were in agreement cargo ... as he sees it.
silence is not agreement. Thus it would as to the condition of the cargo,
seem that, if faced with a clause in the especially the Novorossiysk cargo. It A master will often seek a second
charterparty worded similarly to clause is apparent that AMC were willing to opinion from a surveyor and in the
52, the master would probably have allow SSMs surveyors remarks to be case of cargoes of steel products, it is
to continue loading, but would have inserted into the Novorossiysk bills. common for pre-loading surveys to be
the right and obligation to clause the Had this been done, it would have carried out, as happened here. What
bill(s) himself, just as he would have if been difficult for SSM to have argued is uncommon is that the master and
the charterers/shippers had refused his that the bills did not accurately state SSM refused to allow the cargo to be
request. the condition of the cargo at the time it loaded, even though AMC confirmed
was received by the vessel. If there had that the surveyors remarks would be
Comment been no agreement between SSM and inserted into the bills of lading.
It must be said that clause 52 is not AMC and had AMC insisted on clean
clearly worded. Although the intention bills being issued, it seems the position Both the arbitrators and the judge
appears to be that the master has would have been very different. The found that clause 52 of the charterparty
the right and must reject damaged judge found that clause 52 would did not allow SSM to refuse to load the
cargo prior to loading, the last sentence have operated in such circumstances, cargo. It remains to be seen whether,
has been interpreted by a tribunal of although he does not seem to have having lost on two occasions, SSM wish
London arbitrators and a High Court considered how, in practice, the vessel to appeal to the Court of Appeal. We
judge as meaning something different, would have discharged the steel coils shall keep readers informed.
especially as to when the master can already loaded.
exercise his right and obligation to

Gard AS, March 2011


20

Short measures Value


Gard News 167,
August/October 2002

your bills of lading as much


as your pints of beer
Your pint of beer Short measure? issues a bill of lading showing the shore unknown, and this general reservation
The British have long since loved their figures, without qualification, that is may well be sufficient to protect the
pints of beer. A pint now costs around akin (as explained further below) to carrier. However, it may be insufficient
two pounds, depending on where and the customer paying the pub for his when the shore figures exceed the
what quality one chooses to drink. The pint of beer. Furthermore, if the ship, ships by an amount beyond a normal
beer drinker is not only concerned as with the pint-sized beer glass with a and/or customary difference. Whilst the
with price and quality, however. When large head, has actually received less shore figures may be unknown to the
being poured into the glass most beers cargo on board than the shore terminal extent that the master has not been
produce a froth or head. The size of this figures would suggest, that is also akin able to take his own measurements/do
head varies enormously, and according to a short measure. For the terminal his own calculations with regard to the
to some campaigners it is often larger that could mean being paid (usually on shore tanks, the size of the difference
than it should be. Essentially this means the basis of the bill of lading figures) for between the ship and shore figures
that the customer gets less liquid a quantity of cargo never supplied. alone may give rise to suspicion that
beer than the pint he paid for and the the shore figures are inaccurate. Under
supplier (the pub) makes more profit The legal position the Hague and Hague-Visby Rules2 the
because it is paid for a pint, whereas So why is the issuing of a bill of lading master is not bound to state a quantity
the actual liquid quantity supplied akin to the customer paying for his pint? which he has reasonable grounds
is less. According to campaigners, Well, one of the functions of the bill is a for suspecting does not accurately
research carried out by UK Trading receipt for the goods loaded and if the reflect the goods actually received. If
Standards Officers shows that eight out quantity stated in the bill is inaccurate, the master nevertheless states such a
of ten pints served are less than 100 that can be held against the carrier quantity in the bill, the carrier may be
per cent liquid, that the average liquid (usually the owner in the tanker trade), unable to dispute the short measure,
served is less than 95 per cent, and that on whose behalf the master is signing even if there is evidence to the contrary.
short measures cost consumers over the bill. Most bills of lading issued for
GBP 1 million a day. bulk liquid cargoes are negotiable, But what is a normal and/or customary
that is, they can be transferred (usually difference? Well, it depends on the
Bulk liquid cargo shortage claims by endorsement) from one party to circumstances and the means of
The concern The short measure? another. In the bulk liquid trade, bills measurement used to determine
Whilst Gard Services itself can not may be transferred numerous times, so the ships figures. For tankers, the
comment on these reported results, that the receiver entitled to possession accuracy of tank calibrations, measuring
it does have its own experience of of the cargo at the discharge port may methods and equipment will need
what could be termed short measures be at the end of a long chain. Because to be considered in relation to the
as far as the carriage of bulk liquid that receiver is not likely to have had prevailing circumstances and conditions
cargoes is concerned. Gard Services a representative at the load port to (e.g., swell). In very general terms, if
sees a number of bulk liquid cargo confirm that the quantity stated in the the shippers (terminal) figures exceed
shortage claims and many are the result bill of lading is the quantity actually the ships figures by more than 0.25
of paper differences. In some cases, shipped, he is entitled to place some per cent, Gard Services suggests that
however, it is worrying that an element reliance on the quantity stated in the the bill of lading be claused. A smaller
of the shortage may be attributable bill. This entitlement is recognised percentage, however, may be relevant,
to the issuing of a bill of lading for a by international and national laws and in this regard, when a full cargo is
quantity of cargo that, according to applicable to carriage of goods by loaded, reference should be made to
ships figures, has not been shipped on sea, such as the Hague or Hague-Visby the Vessel Experience Factor (VEF).
board. So what has all this got to do Rules. Under the Hague-Visby Rules,1
with short measures and pints of beer, the quantity stated in the bill of lading The VEF is a ratio calculated by a
the reader may ask? Well, think of the will, when relied on by an innocent comparison between the ship and
ship as the pint-sized beer glass, the third party, be held to be conclusive shippers volume figures. Many tankers
cargo as beer, the shore terminal as the evidence of the quantity shipped on will have a record of these from
pub and the master as the customer (he board. In other words, the carrier can previous shipments. Particular attention
is not the drinker of course, he is the not dispute the quantity, even if there should be paid to previously calculated
custodian, looking after the beer and is evidence that the ship has received VEFs that are very similar for a particular
delivering it safely to the consumer). a short measure. If the quantity in the cargo and place of loading. These
Instead of the froth or head disguising bill is overstated, the carrier is at risk of VEFs may be considered as the normal
the quantity actually received, the shore being liable for a claim to make good and customary difference. However,
tank figures (which are greater than the any short measure. caution must be exercised when using
ships figures) will commonly be used VEFs, e.g., a calculated VEF can only
to try and persuade the master what Of course, most bills contain the words be considered reliable if it is calculated
quantity has been received on board. condition, weight, measure, marks, in accordance with industry guidelines.
If the master relents to pressure and numbers, quality, contents and value For further information on the VEF see
Gards publication Towards Safer Ships
1
Article III (4). and Cleaner Seas.

Gard AS, March 2011


21
Short measure What to do?
So what should the master do if
presented with a bill showing shore
terminal figures that exceed the
quantity on board according to the
ships figures? This is where it gets
difficult unlike with a pint of beer, it is
often simply not practical to demand a
top-up. If the difference is normal and/
or customary, the master need only
ensure that he reserves the carriers
right to challenge the shore terminals
figures, should that be necessary
at a later date. This is achieved by
ensuring that the bill contains a general
reservation, such as condition, weight,
measure, marks, numbers, quality,
contents and value unknown. Remarks
such as clean on board or shipped
on board should be avoided, as they
may be interpreted as giving more
support to the shore terminal figures
and may lessen the carriers ability to
rely on the general reservation.
lading without clausing it with the ships The cost of getting it wrong
If the shore terminals figures exceed figures. As a result, the vessel sailed So what is the cost of failing to
the ships figures by an amount beyond after a delay of 24 hours. The owners clause bills of lading in respect of
a normal and/or customary difference, claimed damages from the charterers short measures? Well, a one per cent
it may be appropriate (time permitting) as a result of the delay. The charterers shortage on a 45,000 MT deadweight
for both ship and shore to re-calculate contended that the master acted product tanker, with a clean product
their figures. Mistakes may have been unreasonably, but the English High value of USD 225 per MT would be in
made, e.g., the amount of cargo left Court disagreed and the owners claim excess of USD 100,000. The cost is even
in the line between the shore tank and succeeded. Owners can rely on this greater to the member, because Club
the ship may not have been deducted case to apply pressure on charterers, cover may not be available. Rule 34.1
from the amount delivered to the vessel whether they be voyage or time (cargo liability) of Assuranceforeningen
according to the shore tank figures. charterers (the latter carrying the risk Gards current Statutes and Rules
Unless and until recalculation shows the of delay in the first instance anyway), excludes cover for costs and expenses
difference to be normal and customary, who may in turn be able to exert some arising out of the issue of a bill of
the master should request the shippers pressure on the shippers/terminal to be lading or other document known by the
to omit/delete their respective figures more reasonable. member or the master to contain an
from the bill of lading. The master is not incorrect description of the cargo or its
obliged to issue a bill of lading showing Readers may well ask what about quantity (our emphasis) or its condition.
the shippers quantity or weight in such letters of indemnity from the shippers
circumstances.3 If the shippers insist that or charterers in return for issuing bills Summary and conclusion
a quantity or weight be shown in the showing shore figures in excess of Next time you are buying a pint for a
bill, the ships figures should be used. If the ships? The simple answer is that, friend in the pub remember that if he
this is unacceptable, the master should where the difference is beyond what is not happy with a short measure you
clause the bill of lading with the ships might be considered to be normal and should get a top-up. Spare a thought,
figures, e.g., ships figures: 12,500 customary, courts will probably take however, for the master who can not
barrels or some other appropriate the view that such letters of indemnity do the same. When dealing with other
wording. If this is refused, the master facilitate a fraud, i.e., it is a deliberate peoples cargoes, the carrier is counting
should issue a written protest to the act of inserting into the bill of lading on the master to get it right. If he does
terminal/shipper as well as the charterer information known to be inaccurate. not, the consequences will be more
and call for the assistance of the local Such letters of indemnity are not legally serious than a disgruntled friend.
correspondent before the bill is signed. binding, and therefore offer the carrier
no protection if the shipper or charterer Gards Guidance on Bills of Lading
At least as far as English law (which will goes back on his promise. New edition
govern a large number charterparties) is For further advice on bills of lading,
concerned, there is authority on which Care should also be taken when agents particularly dealing with pressure
the owners (assuming they are the are authorised to sign bills of lading on to sign bills, see Gards Guidance
carrier under the bill), and therefore the the masters behalf in circumstances on Bills of Lading. This publication
master, can rely in support of their right outlined above. The authorisation has been re-printed, including the
not to sign inaccurate bills. The case in should clearly be conditional on the bill new International Group wordings
question4 is more fully reported in Gard of lading being issued/claused with the concerning letters of indemnity for
News issue No. 150, but a summary ships figures. If sufficient reliance can delivery without production of original
is helpful here. The ships figures not be placed on charterers agents to bills of lading another problem on
were 5,078 barrels (0.94 per cent) less do this, owners would be best advised which the Guidance on Bills of Lading
than the shippers and quite rightly to instruct protecting agents. gives important advice. The Guidance
the master refused to sign the bill of can also be found on the Gard website
at www.gard.no.
2
Article III (3).
3
Hague and Hague-Visby Rules Article III (3).
4
The Boukadoura (1989) 1 Lloyds Rep. 393.

Gard AS, March 2011


22

Clausing bills of lading


Gard News 168,
November 2002/January 2003

correctly - Standard of
reasonable care affirmed

Introduction sides and explains the test with which a the urea originated in Russia. The
Gard Services regularly receives master must comply when considering specification of the cargo described it
questions and approaches from when and how to clause a bill. The as white colour, free flowing, free from
members about clausing bills of lading. vessel in question was the DAVID contamination, prilled form, treated
Often, decisions have to be made AGMASHENEBELI. Judgment was against caking, free from harmful
quickly. The vessel is about to load the given in July this year.1 substances.
cargo, or has already loaded part cargo.
The owners are often under pressure The facts A few days later, the Singapore
from the shippers or charterers, or both, The vessel, a 1987-built bulk carrier, was company re-sold the cargo to a Hong
to issue or agree to the issue of clean chartered by her owners under the well- Kong company. Under the terms of the
bills, although the master is not satisfied known New York Produce Exchange re-sale, the cargo was to be delivered
that the cargo is indeed in apparent (NYPE) form of time charter. Clause 8 to a port in Southern China. The
good order and condition. said that the charterers were to:load, letter of credit required that, amongst
stow and trim and discharge the cargo other documents, a full set of clean
Full and detailed advice on this at their expense under the supervision on board bills of lading were to be
problem is contained in the Gard and responsibility of the Captain, presented. The Singapore company
Guidance on Bills of Lading. who is to sign, if required to do so by also arranged for the vessel to be sub-
Nevertheless, Gard Services is always charterers, Bills of Lading for cargo as chartered, on a voyage charter basis,
happy to deal with individual enquiries. presented, in conformity with Mates or to a company in Riga. Interestingly, the
Tally Clerks receipts. voyage charter contained the following
A recent case which was heard by the In April 1995, a Singapore-based clause, which was not in the head (time)
English Admiralty Court shows how company bought a quantity of urea in charter:
difficult it can be for the master to bulk at Kotka, Finland. The supplier Under supervision of independent
clause the bill of lading in circumstances was named as a Russian company, so surveyor together with Master/Officers
where he is under pressure from all it is perhaps logical to assume that assistance no damaged cargo to be

1 The David Agmashenebeli - QBD (Admlty Ct) (Colman J) - 31st May 2002. LMLN 591 of 11th July 2002.

Gard AS, March 2011


23
loaded into the holds. If such fact will contrast, an inspection report prepared had died some years before the trial,
take place Master has the right to stop a few days after discharge indicated but had given a statement, which was
loading but Charterers and Shippers that the cargo was in normal condition, submitted by the shipowners. The
to be immediately informed to arrange free-flowing and white in colour and statement said that about 30 per cent
removing of any contaminations for suggested that the contamination and of the cargo was discoloured.
Charterers expenses/time. discolouration had been caused by
the unclean condition of the vessels The judges findings
Finally and later that month, the Hong holds. Some 280 MT, or about 8 per Faced with such conflicting evidence,
Kong company re-sold the cargo to a cent of the total cargo, was considered the judge decided that the level of
Chinese company. to be damaged. This report said that pre-shipment contaminants was around
the inspector found no evidence of 0.01 per cent and that the level of
The dispute foreign materials such as plastic, rubber discolouration at the time of loading
The vessel was instructed to load and stone as mentioned in the masters was about 1 per cent. It is unclear how
the urea at Kotka, where she arrived remarks in the bill of lading. the judge reached this figure, but his
towards the end of April 1995. Before decision may have been influenced by
loading started, there was a dispute The arguments the fact that he had not had the chance
as to whether the holds were clean The Singapore company brought a to hear the master give his evidence
enough to receive the cargo after claim against the shipowners for their before the court. Nevertheless, it might
the previous cargo of coal. This was losses. At the heart of the dispute was be said that, although the shippers
resolved by the owners agreeing that the question of the duty in law resting surveyor may have wished to ensure
the master would issue clean mates on a master when clausing a bill of that his clients obtain a clean bill of
receipts and bills of lading, plus a letter lading. The claimants argued that, lading, the master is unlikely to have
of indemnity to the Singapore company pursuant to Article III Rule 3 of the had any such consideration in his mind
in relation to loss or damage which they Hague-Visby Rules (which both sides in reaching his decision to clause the
might sustain as a result of the cargo agreed applied), the duty stipulated bill. Whatever the true position, the
being loaded into unclean holds. In in that Rule on the master to show the judge found that the master was wrong
fact, the master did not issue such a apparent order and condition of the to have claused the bill in relation to
letter. Nevertheless, loading started. cargo was unqualified or absolute. pre-shipment contamination. So far
However, the problems had only just In other words, the master had to as discolouration of the cargo was
begun. Within a few hours of the start take more than reasonable care in concerned, he decided that the master
of loading, the master informed all clausing the bill. They further argued was right to take the view that the
parties that the cargo contained rust, that there was an implied contractual bill should be claused so as to show
plastic and other contaminants and term, or a duty of care in tort, to that a very small part of the cargo was
was of a dirty colour. A letter of exercise reasonable care that the bills of affected, but that his (the masters)
protest was issued and sent to the time lading accurately reflected the apparent figure of 30 per cent was excessive. In
charterers and the Singapore company. order and condition of the cargo. the judges view, the master did not act
Some two weeks later, the shipowners reasonably in clausing the bill in the
local agents issued a mates receipt The shipowners disagreed. In their way that he did. Therefore, he decided
claused as follows: cargo discoloured view, the masters responsibility was that the shipowners had breached their
also foreign materials eg plastic, rust, to honestly and reasonably state the contractual duty under Article III, Rule
rubber, stone, black particles found in apparent order and condition of the 3 of the Hague-Visby Rules to issue a
cargo. cargo as it seemed to him, based on a bill of lading showing the reasonably
The day after, the Singapore reasonable inspection and bearing in apparent order and condition of the
company, to whose order the cargo mind that the master is not an expert in cargo. But this was not the end of the
was consigned in the mates receipt, that particular cargo. story.
informed the shipowners, time
charterers and voyage charterers that The judge seems to have favoured Were the shipowners liable?
no freight would be paid unless a clean the shipowners point of view on this Based on the above, most people
mates receipt was issued. Nevertheless, question. He decided that, although would probably answer yes. In fact,
in mid-June, the bills of lading were there was a contractual duty of care on the answer was no. Why? The reason
signed by the shipowners on behalf of the master to issue or approve of the was that the judge decided that the
the master. They were claused in the issue of a bill of lading showing the master was entitled to clause the bill
same terms as the mates receipt. apparent order and condition of the of lading in relation to the very small
cargo, based on his reasonable opinion amount of discolouration which he
Needless to say, the claused bills of such apparent order and condition, (the judge) considered was in evidence
presented problems to those involved the contract did not guarantee the at the time of loading (the judges
in the sale and purchase of the cargo, absolute accuracy of the masters figure of 1 per cent mentioned above).
but all concerned managed to agree statement. The judge further decided Following on from this, the judge
a solution whereby the cargo was that no separate duty of care in tort decided that, because the master
discharged at the end of June. The existed, although he also observed would have been entitled to clause the
market price of urea had fallen during that, if the master was in doubt as to bill in relation to this small amount of
the voyage and the Chinese receivers the apparent order and condition, he discolouration and would in fact have
were prepared to accept the cargo only could call in outside help, usually in done so, the same result would have
if a reduced price was agreed. It was. the form of a surveyor. The judge then been obtained. Because the bill would,
looked at the facts as he saw them. The in any event, have been claused, the
Although discharge had started shippers had appointed a surveyor, claimants would have been unable
towards the end of June, it was not who said that, at the time of loading, to present a clean bill of lading in
completed for another two months. the cargo was discoloured, but only to exchange for payment by the receivers.
A few days before the completion of a very minor extent. His figure was 0.2 Thus the claimants did not suffer any
discharge, the receivers alleged that per cent. He considered that this did loss as a result of the masters failure to
the cargo was water-damaged and not affect the otherwise apparent good properly and accurately clause the bill.
contaminated by coal dust and rust. In condition of the cargo. The master The claim therefore failed.

Gard AS, March 2011


24
Comment Masters in such situation are under not absolute or unqualified. The master
The judge declined to accept the considerable and often conflicting is not expected to be an expert in the
claimants argument that the masters pressure. However, there appears to particular cargo in question - although
duty to issue and/or sign a bill of be no reason to think that, in clausing it is always possible that a master who
lading showing the apparent order the bill in the way he did, the master has, say, 20 years experience of carrying
and condition of the cargo was was doing anything other than acting forest products would be regarded as
unqualified or absolute. Instead, in the way he thought best to protect more expert in that type of cargo than
he reaffirmed that the master had to the interests of both the shipowners a master who had no such experience.
reasonably assess the condition of and the third party cargo buyers. What the master must do is to clause
the cargo, using the skill and ability Unfortunately, the master was unable to reasonably and accurately, using his
expected of someone in his position. explain his actions in court. This may be best judgment and experience. Last but
It was emphasised that the master was why the judge, looking at the matter in not least, the shipowners achieved the
not expected to be an expert in the hindsight, seems to have preferred the right result, despite the judges criticism
particular cargo. Equally, however, it was shippers surveyors opinion, although of the master, because the judge found
emphasised that the master could (and as mentioned, the surveyor is unlikely to that the bills of lading would have been
perhaps should) have called in outside have forgotten that a clean bill of lading claused in any event.
assistance when the dispute over the was vital for his clients.
clausing of the bill of lading first arose. However, the case is likely to be
In our experience, a surveyor is often The good news for shipowners and appealed to the Court of Appeal, so
called in when such a dispute arises. It masters is that the judge underlined the there may be more news to report
is unclear why the master did not do so fact that, in deciding how and when to in due course. Gard News will keep
and unfortunately, he was not able to clause a bill, the master is required to readers informed.
explain his reasoning. use reasonable care. The standard is

Gard AS, March 2011


25

Bills of Lading: Is the


Loss Prevention Circular
No. 05-01, July 2001

shippers stowage request


always compulsory?
Introduction the stowage arrangements were some stage, cargo underwriters offered
Bills of lading in a wording which may finalised, it turned out that 4 of the to settle the claim at the level of 70 per
seem harmless until a claim arises can containers stuffed with aluminum coils cent of the USD 184,000 claimed.
create problems for shipowners on were loaded on deck. The vessel
wording. This circular outlines one encountered bad weather on route The shipowner had a potentially
such case where the bill of lading was to Brazil. As a consequence, 2 of the difficult case, as he had not stowed
claused to include a particular request containers carried on deck as well as the cargo below deck as requested by
for stowage of containers. For further the coils inside the containers, suffered the shippers. The affected containers
information, please refer to the Gard extensive damage. After surveying were effectively loaded on deck. The
Guidance on Bills of Lading which can the aluminum coils the cargo receivers shipowner continued searching for
be found on the Gard Services website rejected them in full, arguing that the best solution to the claim. As he
at www.gard.no. the aluminum was not useful for the was faced with the cargo underwriters
intended purpose. A few months looking to commence proceedings in
Course of events after the rejection of the cargo by the the United States, he considered pieces
At the port of New York, 9 containers receivers, the shipowner received a of legislation which may help him
said to contain (s.t.c.) 18 coils of claim from the cargo underwriters in the resolve the matter.
aluminum sheet (2 coils per container), amount of USD 184,000.
were loaded on board a containership The shipowner discovered a decision
for carriage to Santos, Brazil. The bill The cargo underwriters argued that made in a prior case Insurance
of lading was worded such that, in they were entitled to 100 per cent of the Company of North America v. Blue Star
the event of having to determine the amount they had paid to their assured. (North America) Ltd., where a similar
carriers liability for damage or loss of They stated that the carrier had not situation had arisen. In the BLUE STAR
the cargo, each coil was considered a complied with the terms of the relevant case, a forty-foot container was loaded
package. bill of lading as the cargo had not been on the deck of a containership pursuant
carried under deck as requested by the to a bill of lading stating below deck
The shippers of the cargo requested shippers, and therefore would not be stowage requested. The case was
that the containers be stowed below entitled to limit his liability. The cargo heard at the Southern District of New
deck and a clause stating below deck underwriters threatened to start legal York and the court concluded that the
stowage requested was inserted on proceedings in the United States as the stowage on deck of a containership is
the face of the bill of lading. After shipment originated in New York. At not an unreasonable deviation. This

Gard AS, March 2011


26

decision of the court meant that the Recommendations containerships in the liner trade
carrier was entitled to all the exceptions 1. Shippers instructions regarding the includes this clause or similar
and limitations provided by U.S. stowage of cargo on board should wording.
Carriage of Goods by Sea Act, 1936 be followed. However, if for any
(COGSA). US COGSA applies to all reason the carrier cannot follow the 4. All preventive recommendations
inbound and outbound cargoes to and instructions, he should ensure that should be adhered to as a
from the United States. Furthermore, the bill of lading is properly claused precautionary measure. The
the court went on to analyse the to protect his position. Insurance Company of North
meaning of the clause below deck 2. The wording of the clause stamped America v. Blue Star (North America)
stowage requested and concluded on the face of the bill of lading Ltd. case was of assistance to the
that the bill of lading did not require benefited the shipowner. By using shipowner in this instance. However,
below-deck stowage, as the word the word request as opposed it was a lower court decision. The
request had been used in the bill of to mandatory, compulsorily, possibility of higher court decisions
lading, and request was interpreted required etc., the shipowners in the future may lead to a different
to mean asking or petition. There liability was significantly reduced. result that doesnt favour the
was no contract as only a petition had This reinforces the need to exercise shipowner.
been made and in order for there to considerable care when clausing
be a contract, there must be mutual a bill of lading even though the
assent. request of the shippers is the
same.
A copy of this decision of the Southern 3. The shipowners bill of lading had
District of New York was forwarded to a clause on the reverse side giving
the cargo underwriters with an offer to the carrier the liberty to carry the
settle the claim based on the package containers on or below deck by
limitation according to US COGSA, saying:
i.e. USD 500/package. Since the bill
of lading stated that the packages Goods, whether or not carried in
were the individual coils (2 lost per containers, may be carried on deck
container), an offer of USD 2,000 was or under deck without notice to the
put forward. After consideration, Merchant or any annotation on the
the cargo underwriters accepted the face hereof ...
shipowners offer and the case was
amicably settled for USD 2,000. The shipowner should ensure
that any bill of lading used by

Gard AS, March 2011


27

Early departure
Gard News 150,
June 1998

procedure and bills of


lading
BACKGROUND leaving the vessel free to leave the the shipper/terminal and charterers
The extremely hazardous practice of loading facility without delay. The outlining the difference between the
issuing signed, but otherwise blank terminal concerned in fact asserts that figures.
bill of lading forms, was mentioned in a delay of up to 12 hours will result if
Gard News Edition 991, and on that EDP is not accepted and blank bills not THE DANGERS EXPLAINED
occasion involved the loading of cargo signed. This delay, which is said to arise The issuing of blank but signed bills
at West African ports. Comment was because of the time taken to have shore of lading is a dangerous practice,
also made in Gard News Edition 1022, loading figures properly documented particularly if shore figures are inserted
and reference then was made to a and forwarded to the ship, will also cost without any qualification, e.g. weight,
procedure, known as Early Departure the owner USD 500, a charge imposed quantity etc. unknown. The bills in
Procedure (EDP), being used at many by the terminal for the extra expense the case concerned were to order
loading terminals including some in the involved. This extra expense is probably bills and under the Hague Visby and
North Sea. A common feature of EDP is in respect of the boat fees involved in Hamburg Rules, as well as many
the issuing of bills as mentioned above. delivering documents to the ship at national law hybrid versions thereof,
anchor (where the ship would proceed bills transferred to third parties acting
Investigation surrounding a recent case, immediately after loading if EDP is not in good faith can be held as conclusive
involving the loading of crude oil at a accepted or bill of lading amounts are evidence of the receipt by the Carrier
terminal in the United Arab Emirates disputed). The possible delay could be of the weight and quantity stated
(UAE), revealed that EDP was being further extended should re-calculation within the bill. Even when words such
used including the practice of the or re-dipping of tanks be required as weight, quantity etc. unknown or
signing of blank bills. It is suspected and/or if difficulties are encountered as per shore/shippers figure are used,
that this is not confined to the UAE, and with regard to the clausing of the bills. the Carrier may not be fully protected.
given the grave dangers involved for It may come as no surprise that the Whilst under English law such qualifying
vessel owners who permit, or fail to take terminal concerned was understood to clauses usually prevail4 it is possible
the necessary measures to prevent, the be extremely reluctant to permit any that entitlement to rely on the same
said practices, an opportunity arises to alterations to the bill of lading form or may be removed. This could happen
serve a reminder. any qualification of the details it had where there is a considerable difference
inserted thereon3. (probably in excess of 0.5 per cent)
Whilst EDP is said to be at the option of between the bill of lading and ships
the visiting ship there is heavy pressure It goes without saying that, with a figures; the grounds for this proposition
on owners to comply. Terminals are blank but signed bill in their hands, would be that the difference would
keen to have maximum use of their the shippers seek to insert the highest have been obvious to the master.5 Many
facilities and minimum delay to waiting figures. In this case, such figures other jurisdictions may not of course
vessels, charterers are frequently happened to be shore tank figures and follow the reasoned approach of the
worried about the effect of delay on these were duly inserted in the bill, English courts and qualifying clauses
future part-loading and discharge without the application of any relevant are often ignored completely.6
schedules, as well as complications with Vessel Experience Factor (VEF). The
regard to laytime and demurrage. It is difference between shore and ship It may be thought that the issuing of a
known that EDP is a feature of pre- figures can of course be large and the letter of protest, puts the onus on the
fixture negotiations, and that charterers figure inserted in one bill in this case shipper or charterer to attach it to the
seek to use their commercial bargaining was around one per cent greater than bill of lading, and if he does not attach
power with a view to the inclusion the ships figure (the one per cent it, he is exposed to possible bad
of express charterparty provisions difference was confirmed at subsequent publicity or potentially fraudulent
stating owners acceptance of EDP and independent surveys). An additional behaviour. Whilst the Association is
the deduction from laytime of time concern in this instance was that this not convinced that such an onus exists,
resulting from owners non compliance bill contained no qualifying words or the legal effect of such a protest is very
with it. clausing (even in print) to the effect questionable, particularly against a third
weight, quantity etc. unknown. party bill of lading holder (even if the
In the case concerned, it is understood protest were to be attached to the bill -
that blank bills were presented to the Upon learning of the shore figures at which is unlikely).
master by the pilot/loading master the time of departure from the loading
before completion of loading thus facility, the vessel issued a protest to

1 October 1985, page 7 Signing bills of lading at West African ports.


2 July 1986, page 18 Crude oil trading and supply.
3 Here lies another advantage of EDP for charterers/shippers - a clean bill of lading.
4 In the case of the ATLAS [1996] 1 Lloyds Rep. 642 the judge found that the prima facie presumption of the Hague or Hague Visby Rules could not
apply where the words weight unknown were inserted in the bill. There is no reason to belive that this would not equally apply to bills which would
otherwise qualify for conclusive evidentiary effect.

Gard AS, March 2011


28
As to the possibility of recourse The costs of taking precautionary (2) Bills of lading are not to be signed
against the charterers, the decision in measures and of possible delays can until the accuracy of their contents
the case of the NOGAR MARIN7 is be far outweighed by the liability has been verified and, if necessary,
indicative of the general approach of exposure. Commercial relationships are appropriately qualified by the master or
the English courts. The court stated8 of course important but charterers are the authorised agent of the master.
that, if the master fails to correct a bill well aware of the risks they are trying to (3) The use of vessels agents is
of lading inaccuracy of which he was force owners to take. Charterers would perhaps one way of avoiding the EDP
reasonably aware, and even where the probably not take such similar risks problem and the pressures involved,
charterers knew of such inaccuracy, a themselves (and do not by issuing a although it is appreciated that, with
contractual or implied indemnity to LOI as LOIs are legally unenforceable), isolated terminals, this will probably be
which the owners may otherwise be and there must be many more difficult and costly. This must however
entitled, could not be upheld against important reasons why a charterer uses be compared to the risk exposure. If
the charterers in respect of the carriers a particular owner on more than one agents can be used, bills should only
settlement of a third party claim occasion. be signed by agents on the masters
under the bill of lading. Many other or owners behalf when the master or
jurisdictions could be expected to Owners willing to take a stance can owner has checked that point 2 has
follow a similar approach. take heart from the decision of the been complied with.
English Courts in the case of the (4) If an owner is caught out and
For owners caught out by these BOUKADOURA10. In that case it was reasonably suspects that the figure
dangerous practices, and faced with a held that even where the charterparty inserted in the bill of lading is greater
shortage claim by cargo interests, there provided that bills of lading were to than the amount of cargo shipped on
is also the cold reality that they will be signed as presented, there was an board, attempts should be made to
probably be standing alone. Rule 34(1) implied requirement that the bills as identify the consignee or notify party on
(b)(ix) of the Associations Statutes and presented actually related to the cargo the bill of lading in order to give notice
Rules excludes cover for liabilities, costs and did not contain a misdescription to him of the ships figure. The ships
and expenses arising out of the issue of which was known to be incorrect. The interests should then issue protests to
a bill of lading known by the master to owners were therefore entitled to everyone they can think of, shippers,
contain an incorrect description of the recover their loss (mostly the costs of charterers, charterers agents, and if
cargo quantity. Cover is also excluded the delayed sailing) from the charterers possible, the consignee or notify party.
for ante-dated or post-dated bills9 and not only under the particular express The shippers should also be requested
this may result where blank but signed indemnity contained in the charterparty to attach a copy of the protest to the
bills are issued. but also in damages, arising from bill and to forward a copy of the protest
the charterers breach of the implied to the buyers. As outlined above,
For those thinking that a letter of warranty in presenting an inaccurate such measures will probably not avoid
indemnity (LOI) is the answer, it will bill of lading and subsequent refusal liability but may avoid a claim, for what
no doubt be appreciated that when to accept the masters signature if it will usually be a paper loss.
such documents are given or accepted was qualified with regard to the shore
in unlawful circumstances (such as figure.
where the master/owners knew that
an innocent party would rely on the With the above in mind, the following
incorrect statements) this is tantamount points of advice should be considered:
to fraud. Such documents would be (1) Owners should seek to include an
legally unenforceable and effectively of express provision in the charterparty
no value. stating that EDP is not accepted. This
should be brought to the attention of
SOME ADVICE masters in order that they can resist
Despite the pressures of terminals and further pressure from charterers and
charterers EDP should be resisted. their representatives.

5 Article III, Rule 3 of the Hague and Hague Visby Rules states that no carrier, master or agent of the carrier shall be bound to state or show in the bill of
lading, any marks, number, quantity or weight which he has reasonable ground for suspecting not accurately to represent the goods actually received or
which he has more reasonable means of checking.
6 Spain is a good example of how other jurisdictions treat qualifying clauses. Under Spanish law, such clauses can only be effective if certain conditions
are satisfied, one of which requires the owners to prove that the reason for the inclusion of such clauses must be justified, as their effect is subject to
the masters real and effective impossibility to check the particulars of the cargo. This is obviously a very difficult burden to discharge.
7 [1998] LLRep 412. See also Gard News Edition 111 October 1988, page 5.
8 Exact words not used.
9 Rule 34 (1) (b) (viii).
10 [1989] 1 Lloyds Rep. 393.

Gard AS, March 2011


29

US Customs regulations
Gard News 168,
November 2002/January 2003

relating to cargo
declarations
By Paul Keane, Cichanowicz, Callan, Keane, Vengrow & Textor, L.L.P., New York

Carriers trading with the United States lading. Consequently, it would seem of the Act on a vessel unless instructed
will be faced with extensive new rules that carriers trading with the United by the vessel operator that such cargo
and regulations mandated by the States are no longer able to use such has been properly documented.
United States government through US language in their bills of lading. Carriers Where there are slot charters involved,
Customs as a direct result of the 11th may therefore need to ensure that they the booking carrier (slot charterer) is
September 2001 attacks on the United use the term shippers load and count obligated to notify the operator of the
States.1 or shippers load, stow, and count vessel that the cargo has been properly
rather than the more commonly used documented, and upon receiving such
Said to contain expression said to contain. notification the operator may rely on
Even before new proposed regulations such notification in releasing the cargo
and laws were passed by the US As a final note, certain carriers, for loading aboard the vessel.
Congress, US Customs, especially in including some Gard members, were
Puerto Rico, was insisting that carriers threatened with penalties by US Any US export cargoes that remain
could not insert the words said to Customs if they continued to use the in the marine terminal for more than
contain on their bills of lading. The term said to contain on their bills of 48 hours after being delivered, and
regulations upon which Customs was lading. which are not properly documented,
relying2 were already in existence prior obligate the vessel carrier to notify the
to 11th September 2001. However, The Trade Act of 2002 US Customs Service. Once again, if slot
these provisions only related to filing Subsequent to the problems raised with charters or vessel sharing arrangements
of a Customs Form 1302, which is the use of the term said to contain, are involved, the carrier accepting
commonly called a Cargo Declaration. on 6th August the US enacted the the booking is obligated to report
There was no specific requirement that Trade Act of 2002. While most of the undocumented cargo regardless of
a bill of lading could not contain the Act deals with trade issues, a small whether it operates the vessel
words said to contain. Nevertheless, part of it designated as the Customs or not.
the regulations relating to cargo Border Security Act of 2002 deals
declarations are being interpreted with Customs issues, particularly in Failure to abide by the above
by certain US Customs districts to regard to ocean shipping. Of particular regulations shall subject the party
include the issuance of bills of lading. note for ocean carriers trading to the violating the regulations to civil
Interestingly enough, the regulations United States is 343A, which concerns penalties in a monetary amount up to
do allow the use of the words shippers documentation of water-borne cargo. the value of the cargo or the actual
load and count and provide that According to this provision, no shipper cost of the transportation, whichever
the following statement may be of cargo, including ocean transport is greater. In addition, any cargoes
placed on the cargo declaration:3 intermediaries, i.e., NVOCCs,5 can remaining in the terminal for more than
The information appearing on the tender or cause to be tendered to a 48 hours without proper documentation
declaration relating to the quantity vessel carrier cargo for loading on a shall be subject to search, seizure and
and description of the cargo is, in vessel in a United States port unless forfeiture. The Act also provides that
each instance, based on the shippers such cargo is properly documented. the shipper of any such undocumented
load and count. I have no knowledge Properly documented cargo is cargo is liable to the marine terminal
or information which would lead defined as follows: cargo shall be operator and the ocean carrier for
me to believe or to suspect that the considered properly documented demurrage and any other applicable
information furnished by the shipper is if the shipper submits to the vessel charges, and that the marine terminal
incomplete, inaccurate, or false in any carrier or its agent a complete set of operator and the ocean carrier shall
way. shipping documents no later than 24 have a lien on the cargo for the amount
hours after the cargo is delivered to the of demurrage and any other charges
Although the above language marine terminal operator, but under no assessed as a result of the Customs
is currently only mandated for circumstances later than 24 hours prior seizure.
cargo declarations, it appears that, to departure of the vessel.
based on recent comments by a Finally, section 343A provides for the
US Customs representative4 all US The Trade Act also provides that no establishment of a joint task force to
Customs districts are going to apply marine terminal operator is allowed to evaluate and certify secure systems
the above regulations to bills of load any cargo subject to the provisions of transportation. That task force shall

1 See also article Immigration and customs - Post-11th September reporting and regulatory compliance for vessels trading in US ports in the last issue
of Gard News.
2 19 CFR section 4.7c(1) and (3)(i), (ii), and (iii).
3 46 CFR section 4.7c(3)(i).
4 The deputy commissioner of US Customs, Douglas Browning, has stated recently that the decision of US Customs not to accept the words said to
contain on bills of lading is non-negotiable.
5 Non-vessel operating common carriers.

Gard AS, March 2011


30
establish a programme to evaluate and - shippers commercial invoice number limiting private vehicle access to United
certify secure systems of international and purchase order number; States seaports and will allow Customs
intermodal transport no later than one - hazardous material information; Service offices to utilise personal
year after the date of the enactment of - certification of any empty containers. radiation detection pagers to increase
the Act. The programme established by the ability of the Customs Service to
the task force shall: The proposed regulations have created accurately detect radioactive materials.
- establish standards and a process for a storm of protest by carriers trading to
screening and evaluating cargo prior to the United States, especially container A final provision of the bill sets
import into or export from the United liner operators. The 24-hour notice minimum standards for high security
States; period has been the focus of much of container seals and provides that
- establish standards and a process the complaint, since container carriers each seal is required to have a unique
for system of securing cargo and are often unaware of what is contained identification number and contain
monitoring it while in transit; in NVOCC cargoes and do not receive an electronic tag that can be read
- establish standards and a process for that information until after the vessel electronically at the seaport. Under this
allowing the United States government has sailed. The problem is that any provision, vessels can be denied entry
to ensure and validate compliance with intentional mistakes in the manifest, into the United States if containers
the programme elements; and according to section 203 of the bill, will carried by the vessel are not sealed with
- include any other elements that the result in a penalty of USD 50,000 and a the high security seal in conformity with
task force deems necessary to ensure term of imprisonment for one year, or the bill.
security and integrity of international both, and a civil penalty of USD 25,000
intermodal transport movements. for the first violation and USD 50,000 for As of the time this article was written,
each subsequent violation where the the bill was still under discussion and
Container Security Bill error is not intentional. had not become law.
At approximately the same time that
the Trade Act of 2002 was enacted, Adding to the burden of ocean carriers Customs rulemaking in regard
a bill was introduced into the United is section 204 of the bill, which provides to the presentation of cargo
States Senate by Senator Feinstein for a shipment profiling plan requiring manifests
of California which was designated common carriers, shippers, and ocean Immediately after the introduction of
the Comprehensive Seaport and transportation intermediaries to provide Senator Feinsteins bill, United States
Container Security Bill of 2002. Of appropriate information regarding Customs proposed new regulations
interest in this bill is section 104, which each shipment of merchandise. In that which mirror the provisions of the
transfers the responsibility to license regard, there are certain requirements proposed Comprehensive Seaport
and revoke or suspend a licence of an for bills of lading that include the and Container Security Bill of 2002
ocean transport intermediary from the following: discussed above. According to these
Federal Maritime Commission to the - weight of the cargo; proposed regulations, the vessels
Commissioner of Customs, so that the - value of the cargo; cargo manifest must be received from
ocean transport intermediaries (freight - vessel name; the carrier 24 hours before the cargo is
forwarders and NVOCCs) can assist the - voyage number; laden aboard the vessel at the foreign
Commissioner of Customs in collecting - description of each container; port of loading. According to US
data that can be used to prevent - description of the nature, type, and Customs, the analysis of such manifest
terrorist attacks in the United States. contents of the shipment; information will allow it to identify
- code number from the harmonised high-risk containers and will allegedly
Also of interest to carriers is section tariff schedule; ensure prompt processing of lower-risk
202, which requires the pilot, master, - port of destination; containers.
operator, or owner (or an authorised - final destination of the cargo;
agent thereof) of every vessel carrying - means of conveyance of the cargo; While the regulations for supplying
cargo to the United States not later - origin of the cargo; a manifest 24 hours in advance of
than 24 hours prior to departing from - name of the pre-carriage deliverer or leaving the load port might not cause
any foreign port or place to transmit agent; problems to carriers involved in the
electronically the cargo manifest - port at which the cargo was loaded; bulk trades, it certainly has caused an
information required by the bill. The - name of the formatting agent; uproar among container liner operators
information required to be provided - bill of lading number; trading to the US. Various organisations
to Customs includes 23 separate - name of the shipper ; such as the World Shipping Council
items which must appear on the cargo - name of the consignee ; are preparing to file comments in
manifest, such as: - universal transaction number or carrier regard to this proposed rulemaking
- shippers name and address; code assigned to the shipper by the and many other affected parties will
- consignees name and address; Commissioner of Customs. likewise try to persuade US Customs
- discrepancies between actual boarded that the regulations are unnecessarily
quantities and bill of lading quantities The purpose of the profile is to assist burdensome. However, in the climate
(except that a carrier is not required to Customs in locating containers and presently existing in the US as a result
verify boarding quantities of cargo in shipments that can pose a threat to the of the 11th September attacks, finding
sealed containers); security of the United States, and to a sympathetic ear will be difficult.
- location of the warehouse or other create a profile of every container and
facility where the cargo was stored every shipment within the container The proposed regulations also will:
while under the control of the carrier; that will enter the United States. - Require NVOCCs to be considered as
- name, address and identification manifesting parties and would obligate
number of the carriers customer, The bill also provides for security at NVOCCs to transmit their cargo
including the forwarder, non-vessel seaports in the United States including information to Customs in an accurate
operating common carrier, and a requirement for identity cards and the and timely manner. If an NVOCC fails
consolidator; determination of whether an individual to do so then he would be subject to
- country of origin and ultimate seeking to work at a seaport poses liquidated damages.
destination; a terrorism risk. It also provides for - Require cargo declarations separately

Gard AS, March 2011


31
listing all foreign-to-foreign cargo not Customs initiates foreign-to- put the container back on the vessel
destined for US ports that remain on foreign container inspections are prohibitive. More importantly, it
board the vessel, as well as any empty If the above were not enough to give is doubtful whether the carrier can
containers that are on the vessel. Once container liner operators in the US ever recover these costs from the
again, this will increase the burdens on trades a massive headache, recent final consignees since the action of
those liner operators trading with the practices by US Customs regarding US Customs will not necessarily justify
US as well as other countries, especially foreign-to-foreign cargoes on vessels an increase in the charges assessed
those carriers who have pendulum, calling at US ports could give carriers against the consignee of the cargo,
transhipment, and around-the-world pause to consider whether trading especially when such consignee is
services. with the United States is even worth not subject to US law. While carriers
- Confirm the prior Customs regulations their cost. In the last several weeks, US trading to the United States are up in
that descriptions such as FAK (freight Customs at various ports in the United arms concerning such inspections, as
all kinds) and STC (said to contain) States has been requiring container of the time of the writing of this article,
will not be acceptable. liner operators to remove foreign-to- Customs is still obligating carriers
- Provide that failure to present accurate foreign containers not destined for US to remove such foreign-to-foreign
manifest information 24 hours prior ports for inspection by US Customs. cargoes for inspection. Only time will
to the loading of the cargo or the The containers that are being inspected tell whether carrier trade and discussion
transmission of any false, forged, or are selected at random and in certain groups, such as the World Shipping
altered documents will result in the instances up to 30 or more container Council, BIMCO, the Box Club and
assessment of monetary penalties moves are required to get access to other such organisations, will be able
under the provisions of 19 USC section the container which Customs wants to persuade Customs to change their
1436(b). These penalties will apply to inspect. The cost of these moves policies. If liner operatives do not make
not only to carriers but to NVOCCs. is for the carriers account, although their feelings known in regard to the
In addition to the assessment of civil US Customs seems to feel that the proposed regulations and legislation,
monetary penalties, Customs may carriers can pass this cost along to then they could be in for a financial
delay issuance of a permit to unload the consignee of the container being and operational nightmare should the
the entire vessel until all required inspected. regulations and legislation be enacted.
information is received. Customs
may also decline to issue a permit to Needless to say, the costs of removing
unload the specific cargo for which a such containers for inspection, shifting
declaration is not received 24 hours cargoes to allow the removal, and
before loading at the foreign port. then shifting other cargoes in order to

Gard AS, March 2011


32

The problems caused


Gard News 101,
March 1986

by ante-dating bills of
lading

In our October edition of Gard News illustrated the problems that can arise August commitments and purchased
(No. 99) we warned against ante-dating when bills are ante-dated. extra goods. They stated that had they
bills of lading. The reason such bills are known the bills were wrongly dated
issued is often due to pressure applied The plaintiffs were the buyers of a cargo they would have rejected them. As they
by the shipper, who requires the shipped aboard the SAUDI CROWN. did not know they took up the bills.
insertion of a particular date in a bill of Under their purchase contract the bills
lading to meet the requirements of his of lading were to be dated: June 20 On discovering they were wrongly
contract with the buyer of the cargo and July 15 without extension the bills of dated they brought a claim against the
often to meet as well the requirements lading to be dated when the goods are shipowners for loss of opportunity to
of the letter of credit by the means of actually on board. Date of bills of lading reject the bills of lading by reason of
which the seller, usually the shipper, shall be accepted as proof of date on fraudulent misrepresentation as to the
is paid. Therefore instead of inserting shipment in the absence of evidence to date on which the cargo was shipped.
as the date in the bill of lading, the the contrary. They succeeded, the judge holding
date when the loading of cargo was that there was a misrepresentation by
completed, the shipper persuades the Loading of the goods in question was the shipowners agents in the course
shipowner to insert a different date. As completed on 26 July. All bills were of their normal duties. This was a fraud.
we have said before this can amount to dated 15 July. The bills were shipped The buyers were awarded damages at
a fraud. We are referring of course to on board bills and were issued by an agreed sum for loss of opportunity
shipped on board bills of lading. shipowners agents on behalf of the to reject the bills.
shipowners. Towards the end of July
A recent case n the English Admiralty the buyers realised that the cargo
Court, the SAUDI CROWN has would arrive too late to meet their mid-

Identity of the carrier


Gard News 170,
May/July 2003

- The House of Lords


decides
An article in Gard News issue No. 1621 of Appeal decision has recently been of lading in preference to the conditions
mentioned the decision of the English overturned by the House of Lords, which set out on the reverse of the bill,
Court of Appeal in the STARSIN case2 has adopted the view and practice of including the so-called demise clauses.
regarding the identity of the carrier in the market whereby the identity of the A more detailed report on the House of
bill of lading contracts. Readers will contractual carrier is that identified in Lords decision will be published in the
be interested to know that the Court unambiguous terms on the face of the bill next issue of Gard News.

1 Whose bill of lading is it anyway?.


2 [2000] 1 Lloyds Rep. 85.

Gard AS, March 2011


33

The date of the bill of


Gard News 151,
September/November 1998

lading

The correct dating of the bill of lading of lading is also relevant. A person who the charge of the carrier. The correct
is a matter of great importance. It is deliberately backdates a bill of lading date of a shipped bill, on the other
material in the context of the contract in order to bring it within the shipment hand, is the date when the goods are
of carriage, the contract of sale and time in the credit acts fraudulently. actually loaded on board. Where the
the documentary credit transaction loading extends over several days, the
if payment of the cargo is arranged Shipped1 and Received for bill should be dated when the loading
through a letter of credit. Shipment Bills of Lading is completed.2
Depending on the time when the carrier
Under the contract of carriage the takes over the goods, a bill of lading Received bill turned into
shipper is entitled to demand that the may be a shipped or a received for shipped bill
bill of lading be dated correctly. If the shipment bill. The practical difference Under the Hague, Hague-Visby and
Master or another agent of the carrier between the two forms is considerable. Hamburg Rules the shipper is entitled
negligently misdates the bill, the carrier Where the carrier issues a shipped to demand from the carrier the issue
as principal is liable in damages if the bill, he acknowledges that the goods of a bill of lading after the goods have
shipper has suffered a loss as a result are loaded on board ship. Where been received into his charge.
of the misdating. There is an implied he issues a received for shipment
obligation to exercise due care in the bill, he confirms only that the goods Article III (3) of the Hague and Hague-
dating of the bill. are delivered into his custody; in this Visby Rules provides:
case the goods might be stored in a 3. After receiving the goods into his
The date of the bill of lading may also depot or warehouse under his control, charge the carrier or the master or
be relevant to the contract of sale. In or even at the quayside. Therefore agent of the carrier shall, on demand of
most international sale contracts the the shipped bill is more valuable the shipper, issue to the shipper a bill of
tender of a wrongly dated bill of lading to a shipper than the received for lading ().
qualifies as breach of a condition and shipment bill, because it confirms that
entitles the buyer to reject the bill the shipment has taken place. Article 14.1 of the Hamburg Rules
and to treat the contract of sale as reads:
repudiated. A container bill of lading issued upon 1. When the carrier or the actual carrier
receipt of the cargo by the carrier at a takes the goods in his charge, the
Where payment of the cargo is loading depot is normally a received carrier must, on demand of the shipper,
arranged through a letter of credit, the for shipment bill of lading. The correct issue to the shipper a bill of lading.
credit often states a date for shipment date of a received for shipment bill is
of the goods, so that the date of the bill the date when the goods are taken into

1 A shipped bill of lading is also referred to as an on board bill.


2 Oetker v IFA (The Almak) (1985)1 Lloyds Rep. 557.

Gard AS, March 2011


34
At this time the carrier is only obliged that the bills of lading to be tendered such bills of lading. It should be noted
to issue a received for shipment have to be clean, on board, to order that the exclusion applies to ante or
bill, showing that he has received the and blank endorsed. A received for post-dating of both, shipped and
goods into his charge. However, after shipment bill does not satisfy these received for shipment bills. Members
the goods are loaded the shipper may terms because it is not an on board should also be aware that cover is
demand the issue of a shipped bill. bill, but the International Chamber of excluded in these cases even if the bill
The Hague, Hague-Visby and Hamburg Commerces Uniform Customs and of lading was issued by the Members
Rules also provide that where a bill Practice for Documentary Credits agent without the Members knowledge
of lading has been previously issued, (UCP), like the Hague, Hague-Visby and of its incorrect dating.
e.g., a received for shipment bill, the Hamburg Rules, equate a received
carrier may notate the document at the bill which has been duly notated to a Since there are occasions when
port of shipment with the name of the shipped bill. The UCP 500 provide in Members are unable to avoid liabilities
ship upon which the goods are shipped Article 23(a) (ii): or costs due to the issue of ante-dated,
and the date of shipment, stating that or occasionally post-dated bills of
the goods are now on board, and when Loading on board or shipment on a lading (for example due to errors by
so notated the document shall have the named vessel may be indicated by pre- agents or masters and officers), the
same functions as a shipped bill. printed wording on the bill of lading Associations Extended Cargo Cover
that the goods have been loaded on and Comprehensive Carriers Liability
Article III (7) of the Hague-Visby Rules board a named vessel or shipped on a Cover are able to provide protection.
reads: named vessel, in which case the date There is, however, an exclusion for
7. After the goods are loaded the of issuance of the bill of lading will be wilful misconduct as expressed in the
bill of lading to be issued by the deemed to be the date of loading on Associations Rule 72, incorporated in
carrier, master, or agent of the carrier, board and the date of shipment. the terms of cover.
to the shipper shall, if the shipper so
demands, be a shipped bill of lading, In all other cases loading on board a
provided that if the shipper shall have named vessel must be evidenced by
previously taken up any document of a notation on the bill of lading which
title to such goods, he shall surrender gives the date on which the goods
the same as against the issue of the have been loaded on board, in which
shipped bill of lading, but at the case the date of the on board notation
option of the carrier such document will be deemed to be the date of
of title may be noted at the port of shipment.
shipment by the carrier, master, or
agent with the name or names of the Accordingly, in cases where a received
ship or ships upon which the goods for shipment bill is notated shipped,
have been shipped and the date or the date of shipment of the goods
dates of shipment, and when so noted, being acknowledged in the document
if it shows the particulars mentioned in is that of the notation, and not the
paragraph 3 of Article III, shall for the original date, which simply indicates the
purpose of this article be deemed to time of the receipt of the goods by the
constitute a shipped bill of lading. 3 carrier and not the time when they are
actually loaded on board.
Article 15.2 of the Hamburg Rules
contains a similar provision: Ante-dated and post-dated bills of
2. After the goods have been loaded lading and P&I cover
on board, if the shipper so demands, Rule 34 of Gards 1998 Statutes and
the carrier must issue to the shipper Rules reads, inter alia:
a shipped bill of lading which, in 1. The Association shall cover the
addition to the particulars required following liabilities when and to the
under para 1 of this Article, must state extent that they relate to cargo ():
that the goods are on board a named provided that () the cover () does
ship or ships, and the date or dates of not include:
loading. If the carrier has previously viii) liabilities, costs and expenses
issued to the shipper a bill of lading or arising out of the issue of an ante-
other document of title with respect to dated or post-dated Bill of Lading,
any of such goods, on request of the waybill or other document containing
carrier, the shipper must surrender such or evidencing the contract of carriage,
document in exchange for a shipped that is to say a Bill of Lading, waybill or
bill of lading. The carrier may amend other document recording the loading
any previously issued document in or shipment or receipt for shipment on
order to meet the shippers demand for a date prior or subsequent to the date
a shipped bill of lading if, as amended, on which the cargo was in fact loaded,
such document includes all the shipped or received as the case
information required to be contained in may be.
a shipped bill of lading.
Post-dated bills of lading are not as
Where payment of the cargo is common as ante-dated bills but in
arranged through a letter of credit, either case the Association does not
the terms of the credit may provide cover liability arising out of the issue of

3 Article III (7) of the Hague Rules contains a very similar provision, the only material difference being the omission of the words if it shows the
particulars mentioned in paragraph 3 of Article III.

Gard AS, March 2011


35

English law
Gard News 171,
August/October 2003

Is the demise clause now


dead and buried?
An article in Gard News issue No. 1621 deemed to be evidence of a contract The final issue was whether the
mentioned the decision of the English with the shipowner, not the charterer. shipowner could obtain any protection
Court of Appeal in the STARSIN case from the Himalaya clause in the
regarding identity of the carrier clauses Leave to appeal this decision to the bill and if so, to what extent. The
in bill of lading contracts. The Court House of Lords was given. Leave is not Himalaya clause is a standard clause
of Appeal decision has been recently given automatically and the fact that in many bills of lading, the purpose
overturned by the House of Lords. leave was given suggests that the Lords of which is generally to provide any
considered the matter to be one of servants or agents of the carrier or
Introduction general and fundamental importance independent contractors with (at least)
In recent years, the English courts to the shipping industry. Judgment was the same protection, rights, immunities,
have heard a series of cases essentially handed down on defences, etc., as the carrier himself
revolving around a series of closely 13th March 2003.6 has.
connected questions:
Was the demise clause, or identity of The House of Lords decision The Court of Appeal had decided that
carrier clause, valid? The Lords considered the issues listed the shipowner fell within the definition
With whom did the bill of lading above. They decided as follows. of an independent contractor and
evidence a contract the party named the House of Lords agreed. The next
on its face and on whose behalf the On the vital question of whether the question was what protection this
bill was signed (who was normally the bill of lading was evidence of a contract clause gave the shipowner.
charterer), or the shipowner? with the shipowners or the issuer (the
If the bill was evidence of a contract charterer), the Lords overruled the It is clear that there was a lot of legal
with the charterer, could the cargo Court of Appeal and decided that, in argument and discussion on this point.
owner sue the shipowner in tort? this case, the bill was evidence of a The shipowner maintained that the
If yes, could the shipowner rely contract with the charterer. Essentially, clause gave him a blanket indemnity for
on the Himalaya clause in the bill of the Lords adopted what might be called ...any liability whatsoever...for any loss,
lading and if so, to what extent? a pragmatic and realistic approach. damage or delay of whatsoever kind
They said that a printed demise clause arising or resulting directly or indirectly
The FLECHA, the HECTOR and the (which is a standard feature in many from any act, neglect or default on his
STARSIN at first instance bills of lading) should be overridden part while acting in the course of or in
The article in Gard News issue No. by specific provisions of a bill (e.g., the connection with his employment....
162 commented on the outcome of signature) which otherwise made it clear
the three cases in question. It will to the shipper that he was contracting The Court of Appeal rejected this
be recalled that the three vessels with the charterer. The Lords made it argument. In essence, they decided
concerned were the FLECHA,2 clear that certainty was important and that the protection given by this clause
HECTOR3 and STARSIN.4 It will also that a business sense would be given to to third parties (the shipowner in this
be recalled that there were conflicting a business document. case) was the same (no more and
decisions at first instance (i.e., in the no less) than the protection given to
High Court). The FLECHA and the It followed from this that a claim in tort the carrier under the bill of lading.
HECTOR cases were not appealed, could be made against the shipowner, The House of Lords disagreed with
but the STARSIN case was taken to the but who could bring this claim? The the Court of Appeal on one issue of
Court of Appeal, which overturned the action had been brought in the name law, but on the main question, they
first instance decision.5 Whereas the of the numerous buyers of the cargo. agreed that the protection given to
judge at first instance decided that the The Court of Appeal had decided that independent contractors was no more
(in his view) clear wording on the front the act of negligence on the part of the and no less than the protection given
of the bill showing that the charterer shipowner which gave rise to the claim to the carrier under the bill of lading. In
was the carrier was clear enough to occurred at the latest on completion of this case, they found that the general,
override the printed demise clause loading. On this basis, the Court said very wide, exemption from liability
on the back of the bill, the Court of that only the one claimant who had provision which is quoted above was
Appeal, by a majority of two to one, obtained title to the goods by that time struck down by Article III, Rule 8 of the
overruled him and decided that the could bring an action in tort. The other Hague Rules, which were incorporated
demise clause should prevail. On claimants could not. The Lords agreed. into the bill of lading. It will be recalled
the basis of this decision, the bill was that Article III, Rule 8 says that any

1 Whose bill of lading is it anyway?.


2 [1999] 1 Lloyds Rep. 612.
3 [1998] 2 Lloyds Rep. 287.
4 Homburg Houtimport B.V.v. Agrosin Private Ltd. and others (The STARSIN) [2000] 1 Lloyds Rep. 85.
5 [2001] 1 Lloyds Rep. 437.
6 [2003] 1 Lloyds Rep. 571.

Gard AS, March 2011


36

clause in a contract which relieves the Conclusion the bill. This decision may be regarded
carrier or the ship from liability for loss The Uniform Customs and Practice for as a victory for common sense.
or damage shall be null and void. Documentary Credits (UCP 500) require Nevertheless, although it strikes a heavy
that ocean bills of lading identify blow to the demise clause, it does not
Four out of the five Law Lords who the carrier, the signatory and the necessarily kill it off and depending on
heard the case decided that the capacity in which he signs. As a result, the precise form and wording of a bill
protection given to the shipowner the signature box in bills of lading of lading, it appears that it may still be
was limited to the protection given to must contain clearly authenticated open to an English court to find that
the charterer under the bill of lading: information, which makes it easier it is valid and that a bill is evidence of
i.e., the Hague Rules as expressly to identify the carrier by examining a contract with the shipowner and not
incorporated into the bill. Thus if the the face of the bill. In fact, litigation with the charterer, even though the bill
charterer (the carrier under the bill regarding the identity of the carrier may have been issued on the charterers
of lading) had a defence to the claim has diminished radically since the form. Close consideration of the precise
under the Hague Rules, so would the introduction of UCP 500 in 1994, at least form and wording of a bill will probably
shipowner. If the charterer did not in cases where the bill of lading does still be required.
have such a defence, nor would the not contain a demise clause. Where the
shipowner. Based on the facts, the bill does contain a demise clause there
cargo damage was caused by negligent may still be conflict between the front
stowage, for which the charterer/ carrier and the reverse of the bill, as shown
(and therefore the shipowner) had no above.
defence under the Hague Rules.
The general effect of the UCP 500 on
One of the Law Lords dissented the signature box in bills of lading has
from this decision and held that the been to let cargo interests know exactly
exemption from liability provision who they are contracting with. The
remained valid to its full extent and House of Lords decision attempts to
gave the shipowner protection against ensure that this clarity is not obscured
any liability in tort. by demise clauses on the reverse of

Gard AS, March 2011


37

English law Whose bill Gard News 162,


May/July 2001

of lading is it anyway?

In claims relating to carriage of goods contract with someone other than the has it been signed? The signature does
by sea, a common argument between shipowners. This can be done in several not answer the question. You are now
those representing cargo interests ways. Perhaps the most common is going round in circles.
and those acting for the shipowners where the bill is actually issued on the
or charterers is whether the bill of charterers form, with their company Such wording would, by itself, be
lading evidences a contract with the logo and/or name and address at the difficult enough, but as with many legal
shipowners or with another party, often head of the bill. Often, this is coupled issues, what may appear simple at first
a charterer, whose name may appear with the bill being signed by the sight is in fact more complex, at least
on the front of the bill. This is despite charterers agents, on behalf of the under English law. A series of recent
the fact that many bills of lading still carrier. Unfortunately, the signature English court decisions has shown that
include a demise or identity of rarely identifies the carrier by name. not even all judges can agree on the
carrier clause on the back. Such a More investigation is therefore needed. law, even when faced with virtually
clause has been struck down in many identical bills of lading.
jurisdictions, but in England it was until
The back of the bill may help.
recently generally regarded as valid and
Sometimes, this contains a clause which The first of what might be called a
effective in making the defines the carrier. Like the signature on trilogy of cases was the HECTOR.1 In
bill evidence of a contract with the the front, it is, unfortunately, rare to find this, as in the other cases mentioned,
shipowners. such a clause which identifies the carrier several other issues arose, but the
by name. If there is such a clause, essential issue in all three cases
Why, then, should there be the identifying the carrier should be fairly was whether the bill of lading was
argument mentioned above? Difficulties straightforward. More often, however, an owners or charterers bill. In the
can arise when, leaving aside the the clause says that carrier means the HECTOR the bill contained a standard
demise clause, the bill otherwise party on whose behalf this bill of lading demise clause and was signed for
suggests that it is evidence of a has been signed. But on whose behalf and on behalf of the Master. This

1(1998) 2 Lloyds Rep. 287.


2(1999) 1 Lloyds Rep. 612.
3(2000) 1 Lloyds Rep. 85.

Gard AS, March 2011


38
indicated it should be an owners bill. parties intended that charterers and gave judgment at the end of January
It also contained an express stipulation not the shipowners were entering into this year. Fortunately, for the time
that the charterers were the carrier. This the contract evidenced by the bills. He being at least, the Court of Appeal
suggested that the bill was a charterers decided that the demise clause on the seems to have resolved the conflicting
bill. What did the court decide? back was valid and effective. decisions. One of the three Appeal
Court judges was Lord Justice Rix, the
The judge decided that the express The last of the three cases was the same judge who decided the HECTOR
stipulation on the face of the bill which STARSIN.3 It had many similarities to the at first instance. He issued a judgment
identified the carrier as the charterers FLECHA, not least of which was that the dissenting from his two colleagues.
should override the standard printed bill of lading at the centre of the case By a two to one majority, the Court
wording which indicated that it was an was on virtually the same form as the of Appeal overruled the decision of
owners bill. His reasoning seems to bill in that matter. the High Court and decided that the
have been that, whereas the demise bills evidenced a contract with the
clause was common to all bills of lading Although he made the point that the shipowners, not the time charterers,
issued on the form in question, demise clause would be overridden giving the demise clause a new lease of
the express stipulation was not, but was only by clear words in the signature life under English law.
used in that case only. The charterers box which showed that the charterers
were therefore the contractual carrier. were the carriers, the judge decided However, the overriding message from
that the wording in question was clear all these cases is that, under English
The next case in the trilogy was the enough to negate the demise clause. law, each bill will be considered on
FLECHA.2 The bills were issued on The bills were, therefore, charterers its own facts. The demise clause is,
the form of the time charterers, but bills. In reaching his decision, the judge generally, still valid, but other factors
contained a demise clause in the usual evidently disagreed with the FLECHA particularly the form of signature will
wording. They contained the usual decision. come into play and may override this
printed text providing for signature by clause.
or on behalf of the Master, but in fact, Unfortunately, the STARSIN decision
were all signed by the time charterers left many people confused as to how
agents. The signatures identified the the same bill of lading form could
time charterers as the carrier. be interpreted by different judges
as being, firstly, an owners bill and
The judge decided that the bills were secondly, a charterers bill. The owners
owners bills. In particular, he said of the STARSIN may have felt the same,
that the forms of signature did not go since they appealed the first instance
far enough to make it clear that the decision to the Court of Appeal, which

Gard AS, March 2011


39

Deck Cargo
Gard News 145,
March 1997

A Summary of English
and US Law
GENERAL PRINCIPLE the goods were stowed on or under The same protection is afforded by
Normally a carrier will not be authorised deck. the liberty clause where an exemption
to stow goods on deck unless there is a clause might be removed on the basis
custom of the trade or port of loading Under English law a general liberty to of construction.
to stow the specific goods on deck carry goods on deck is not sufficient,4
for the voyage in question,1 or unless since the transferee would not be WHERE THE HAGUE OR HAGUE-
there is an express agreement with able to ascertain whether the liberty VISBY RULES DO NOT APPLY
the shipper of the goods to stow them had been exercised or not. Similarly, Provided deck cargo is successfully
on deck. Otherwise deck stowage will under US law a clause providing that excluded from the operation of the
be unauthorised and the carrier will the carrier is entitled to carry the cargo Rules, the parties are free to agree on
be liable for loss of or damage to the on deck unless the shipper objects is any terms of carriage. This is because
goods resulting from the deck stowage. also not sufficient,5 since the transferee third parties to whom the bill of lading
would not be able to ascertain whether may be transferred are aware of the
Under English law it is a matter of or not the shipper had raised an deck carriage and the fact that the
construction whether the exception objection. Further, under US law a Rules do not apply. In these cases it
clauses in the bill of lading or simple notation on the face of the bill is possible for the carrier to exclude
charterparty will protect the carrier may also not be sufficient and it may liability for loss of or damage to deck
in the case of loss of or damage to be a requirement that the shipper cargo.
unauthorised deck cargo.2 Under knowingly assented to carriage on
US law unauthorised deck cargo has deck. 6 Under English law liability may be
been held to constitute an unlawful excluded through a clause on the face
deviation.3 The fact that in certain trades it is of the bill of lading stating: Carried on
customary for specific cargoes to be deck at shippers risk without liability
THE HAGUE AND HAGUE-VISBY carried on deck is irrelevant to the for loss and/or damage howsoever
RULES question of application of the Hague caused.
England is a party to the Hague-Visby and Hague-Visby Rules. Unless the
Rules. The law applicable to carriage bill of lading expressly states that the This is because under English law it is
of goods by sea in the US is based on goods are carried on deck the Rules will possible to contract out of liability for
the Hague Rules. It is generally said apply. negligence if it is done in clear and
that the Hague and Hague-Visby Rules unambiguous terms.7
do not apply to deck cargo. However, LIBERTY CLAUSES
in order to avoid the operation of the Whenever cargo is (or may be) carried However, the same clause will not
Hague and Hague-Visby Rules two on deck the Association recommends be effective under US law, since the
requirements must be satisfied: the following clause be inserted in bills US courts will not allow the carrier to
(1) the cargo must be stowed on deck of lading: escape from liability for loss or damage
and Liberty to Stow on Deck arising from his own negligence, so
(2) the deck stowage must be clearly Carrier has liberty to carry goods on that any provision to that effect in a bill
stated on the bill of lading. deck without notice to the merchant of lading will be against public policy
and without stating the on deck and therefore void.8 Furthermore, in
CLEARLY STATED ON THE BILL OF carriage on the bill of lading. respect of shipments to or from the
LADING USA the Harter Act applies. This Act
Although it is easy to establish whether Although not having the same effect for makes it unlawful to insert any clause
a specific cargo has in fact been carried the purpose of avoiding application of in a bill of lading relieving the carrier
on deck or not, for that is a question the Hague or Hague-Visby Rules as a from liability for his own negligence,
of fact, it is not so easy to satisfy the clause expressly stating that the goods fault or failure in proper stowage (in
requirement that a clear statement are shipped on deck, this clause may be respect of both, on-deck and under-
should appear on the bill of lading. The useful, since it authorises deck carriage. deck cargo). Any contractual provision
crucial question appears to be whether Where arguments of reckless conduct in that respect will be null and void
a third party transferee of the bill of or fundamental breach are raised and of no effect. Accordingly, when
lading would be able to ascertain from by claimants the clause may afford an on-deck bill of lading is used for
the terms of the bill of lading whether important protection to the carrier. the carriage of cargo to or from the

1
For instance, carriage of enclosed containers on decks of purpose-built container ships is almost universally regarded as a customary method of
carriage. Similarly, the carriage of logs on deck of purpose-built log-carrying vessels is also accepted as customary.
2
THE ANTARES (1987) 1 Lloyds Rep. 424.
3
St. Johns Corp. v. Companhia Geral, etc., 263 US 119 (1923).
4
Svenska Tractor v. Maritime Agencies (1953) 2 Q.B. 295.
5
The Hong Kong Producer (1969) 2 Lloyds Rep. 536 (2nd Cir.).
6
See Ingersoll Milling v. Bodena (1988) AMC 223.

Gard AS, March 2011


40

United States, insertion of the following inconsistent with such provisions of necessary to incorporate terms in the
clause on the face of the bill of lading is COGSA, by the terms of this bill of contract at least as favourable to the
recommended9: CARRIED ON DECK. lading. carrier as those laid down in the Rules,
Risk of loss or damage inherent to on to serve as protection in case the clause
deck carriage is born by the shipper/ Finally, it should be remembered that if attempting to exempt all liability for
consignee but in all other respects risk the Hague or Hague-Visby Rules do not deck cargo is not upheld. Failure to do
of loss or damage is governed by the apply to deck carriage, then in principle so would prejudice P&I cover.
provisions of the Carriage of Goods the carrier would not be able to rely on
by Sea Act of the United States, 1936 the defences and limitations contained
(COGSA) (notwithstanding Section in the Rules, which form the basis for
1(c) of COGSA) and, to the extent not P&I cover.10 In such cases it will be

7
Nelson Line v. Nelson (1908) A.C.16,19.
8
Liverpool & Great Western Steam Co. v. Phenix Ins. Co., 129 US 397, 438-463 (1889).
9
An alternative arrangement is to have pre-printed On Deck Cargo clause on the reverse side of the bill of lading dealing with liability/time limitation/
package limitation provisions (which in this case may be in terms more favourable to the carrier that those laid down in COGSA), with a stamped clause
on the face of the bill of lading stating On Deck Carriage and directing ones attention to the provisions for on deck carriage on the reverse side of the
bill of lading.
10
Rule 34.1.ii of Gards Statutes and Rules 1996.

Gard AS, March 2011


41

FIOS revisited
Gard News 169,
February/April 2003

It is well known that a carrier is bound responsibility for loading and stowage discharge cargo free of expense to the
to properly and carefully load, of cargo, some of which are as follows: vessel.Trimming is understood to mean
handle, stow, carry, keep, care for and leveling off of the top of the pile and
discharge goods which he carries. 1. The cargo shall be brought into the any additional trimming required by the
This principle is laid down in the Hague holds, loaded, stowed and/or trimmed, Master is to be for Owners account.
and Hague-Visby Rules (Article III, tallied, lashed and/or secured and
Rule 2), and in the majority of all other taken from the holds and discharged The cargo was steel coils to be shipped
legislation and conventions governing by the Charterers, free of any risk, from India to Spain, although the form
the obligations of a carrier in contracts liability and expense whatsoever to the of charter used was actually intended
for the carriage of goods by sea. Until Owners. 2 for the carriage of ore cargoes.
1954, at least as far as English law was The claim was brought against the
concerned, it was considered that the 2. Cargo shall be loaded, spout- shipowners by charterers under the
carrier would have an absolute liability trimmed and/or stowed at the expense charterparty and by shippers and
to ensure that these operations were and risk of Shippers/Charterers 3 receivers under the bills of lading. There
carried out in a correct manner, and that was no dispute that the damage had
the carrier would be liable to the cargo 3. Other than Bulk Cargo - If loading been caused by improper or defective
owners for any loss which resulted other than bulk cargo, the cargo loading, stowage, lashing, securing,
from these operations being carried shall be loaded and stowed by the dunnaging, separation and discharge.
out incorrectly or to a standard falling Charterers at their expense, but under
below that which could reasonably the supervision of the Master... 4 Claims under the charterparty
be expected of a competent and Charterers contended that the effect
responsible carrier. 4. Shipper/Charterers/Receivers to put of clause 3 of the charterparty acted
the cargo on board, trim and discharge only to transfer financial responsibility
In 1954, the English High Court cargo free of expense to the vessel5 for these operations to them, risk and
stated1 that the carrier would bear responsibility remaining with owners.
responsibility for those parts of In the absence of any other terms However, the court examined clause
the carriage which he had actually governing the loading and stowage 3 in conjunction with clause 17 and
contracted to undertake. The court operations, responsibility for these reached a different conclusion. As
accepted that as the contract for operations would normally be the cargo consisted of steel coils,
carriage could reasonably be broken considered to lie with the shippers/ the reference to trimming the pile in
down into several distinct operations charterers in 1 and 2 above, but will clause 17 was deemed to be of no
- loading, stowing, securing, carrying remain with the vessel in 3 and 4, as the effect, this phrase being appropriate
and discharging - it was for the carrier risk of such operations has not been to an ore cargo (for which the form of
and shipper to agree who would be expressly transferred to the charterers. charter was intended), but not when
responsible for each operation, but that However, this issue has now been considering the cargo in question.
if the carrier accepted responsibility for revisited once more. However, the remainder of the clause
these operations, he would be bound was appropriate to a cargo of steel
to do so in accordance with the rules The dispute coils, as this cargo still had to be
governing the contract of carriage (at The High Court in London has placed on board and discharged, and
that time, the Hague Rules). recently decided a case concerning clause 17 was clear that responsibility
the interpretation of the terms of a for these operations would lie with
Over the years, there have been several STEMMOR form of charterparty (4 charterers. The court took the view that
conflicting court decisions as to when above) and their incorporation into the reference to trimming of the cargo
the responsibility for loading and a bill of lading.6 The clauses under should be interpreted as a reference to
stowing cargo shifts to the shipper, consideration by the court were as the securing, lashing and dunnaging
and it is important to use clear and follows: of the cargo, as referred to in clause
unambiguous words in the contract of 3. Freight to be paid at and after the 3. Consequently, the risk of these
carriage to ensure that the responsibility rate of US$per metric tonne FIOST operations had been transferred to
lies with the party intended to bear it. lashed/secured/dunnaged the charterers and their claim against
There are now several standard phrases 17. Shipper/Charterers/Receivers owners failed.
which are used to dictate who will bear to put the cargo on board, trim and

1 In Pyrene Co v. Scindia Navigation Co [1954] 1 Lloyds Rep. 321.


2 GENCON charterparty form, 1994 version, Clause 5.
3 SYNACOMEX 90 charterparty form, Clause 5.
4 WORLDFOOD 99 charterparty form, Clause 10.
5 STEMMOR charterparty form, Clause 17.
6 Jindal Iron and Steel Co and Others v. Islamic Solidarity Shipping Co (Jordan) Inc and Another - QBD - 25th June 2002; LMLN 595, dated 5th
September 2002.

Gard AS, March 2011


42
Claims under the bills of lading decision of the House of Lords,9 which Conclusion
The bills of lading were subject to the approved the comments in Pyrene v. The moral behind this case is that any
Hague-Visby Rules, and shippers and Scindia. charterparty which is to be entered
receivers argued that Article III, Rule 2 into must be worded clearly in order to
rendered the owners responsible for Consequently, the receivers claim in avoid confusion and potential disputes.
the defective loading operations. It respect of damage at loading would If it is the intention of the owners and
was further argued that if clauses 3 and fail on the basis that owners were not charterers to transfer the risk and
17 of the charter were incorporated responsible for this operation, and responsibility for loading and discharge
into the bills, they would act to relieve could rely on Article IV, Rule 2(i) (act or operations to the charterer, care must
owners from liability arising from omission of the shipper or owner of be taken to ensure that the terms of the
negligence, fault or failure in the duties the goods, his agent or representative). charterparty actually do so. There must
provided under Article III, Rule 2, and Receivers claim in respect of damage be no room for ambiguity or confusion
consequently should be rendered caused during discharge failed because in such clauses if costly disputes are to
invalid by Article III, Rule 8.7 The court by the terms of the charterparty, as
be avoided.
examined the decision in Pyrene v. incorporated in the bills, any damage
Scindia 8 and in particular the comment occurring at discharge would be at their
that the object of the Rules is to define own risk.
not the scope of the contract service
but the terms on which that service is to The shippers were unable to prove their
be performed. It was decided that the claim for damage occurring at loading
whole contract of carriage was subject as they were responsible for these
to the Rules, but the carrier was free operations, and were unsuccessful in
to contract on terms by which loading their claim for damage caused during
was not included in the contract, and discharge due to Article IV, Rule 2(q)
for which his obligations would not be (any other cause arising without the
subject to the Rules. The court made actual fault or privity of the carrier).
further reference to a subsequent

7 Article III, Rule 8 reads: Any clause, covenant or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage
to or in connection with goods arising from negligence, fault or failure in the duties and obligations provided in this Article or lessening such liability
otherwise than as provided in these Rules, shall be null and void and of no effect.
8 Supra.
9 Renton v. Palmyra [1956] 2 Lloyds Rep. 379

Gard AS, March 2011


43

FIOS revisited (again)


Gard News 172,
November 2003/January 2004

The English Court of Appeal has reference to the stowing and securing would only apply in respect of those
recently confirmed that a carrier is only requirements that were noted in operations which the carrier had
responsible for the safe loading and a separate clause. The result was undertaken to perform. As the carrier
stowage of a cargo if he has contracted that the trial judges decision was had not, in this case, agreed to load,
to perform those operations. correct, and despite the parties poor stow, secure or discharge this cargo,
choice of standard form contract and the Rules would not apply to those
An article in Gard News issue No. 1691 inappropriate amendments for the operations. The carrier had not agreed
reported a decision of the English High voyage in question, the charterers/ to perform those operations and this
Court2 confirming that a shipowner or shippers/receivers were responsible was sufficient to provide a complete
carrier is only responsible for the safe for the loading, stowage, securing and defence to the claims for damage
loading and stowage of a cargo if he discharge of the cargo. occurring during the operations. The
has actually contracted to perform trial judge was wrong to consider
those operations. The facts of the Interestingly, although the carrier the application of the Rules and the
case are reported in the earlier article. interests had successfully defended carriers appeal in this respect would be
Following a successful defence, cargo the case, they issued a cross-appeal allowed. This decision was expressed
interests have appealed the decision against one of the judges findings. The to be subject to carrier interests
and the Court of Appeal has recently trial judge had stated that in respect taking no part in the operations
issued its decision, which largely upheld of claims under the bills of lading, the under consideration if carriers had
the lower courts decision.3 carriers defences would of necessity be intervened in the operations which they
based on the defences available under had not contracted to undertake they
The appeal judges considered at length the Hague or Hague-Visby Rules (the may have been liable to cargo interests
the arguments that had been raised Rules), whichever may be applicable for any damage occurring as a result of
earlier concerning the interpretation to the contract of carriage evidenced their intervention.
of the various charterparty terms by the bills. The appeal judges agreed
and agreed wholeheartedly with with carrier interests and stated that Cargo interests have appealed further
the trial judges decision that the this interpretation was unnecessary to the House of Lords and Gard News
contract should be read as a whole and erroneous. The Court of Appeal will report on the decision of that court
the reference to trimming of cargo held that although the Rules would as soon as it becomes available.
in one clause should be read as a apply to the contract of carriage, they

1 FIOS revisited.
2 Jindal Iron and Steel Co and Others v. Islamic Solidarity Shipping Co (Jordan) Inc and Another QBD 25th June 2002; LMLN 595, dated 5th
September 2002.
3 [2003]2 Lloyds Rep 87.

Gard AS, March 2011


44

Delivery of cargo in
Gard News 167,
August/October 2002

Chile An English law


perspective
A recent decision of the English whom local law required him to deliver not be as straightforward, and this may
High Court1 challenges the general it, i.e., to the customs authority. be the reason why several carriers have
perception of responsibility of the been faced with misdelivery claims
carrier in the process of delivery of The reasoning of the English court in Chile. The number of misdelivery
cargo in Chile. The three main questions addressed by claims would suggest that there is a real
the English court were the following: problem for carriers in relation to the
Two unpaid shippers in related actions Whether the handing over of the delivery practice in that country.
in London brought claims against their cargo to the customs warehouse
respective ocean carriers for alleged constituted delivery by the carrier Logic versus reality
delivery without production and therefore the end of the According to Chilean law, the carrier
of bills of lading. In this particular case carriers responsibility. is obliged to hand over the cargo to
the consignments had been shipped Whether the customs warehouse customs warehouses within 24 hours
from Hong Kong destined for Santiago could demand from the customs of it being unloaded from a ship. The
in Chile. Liner bills of lading to the agent3 the original bill of lading. carrier can not demand an original bill
order of Chilean banks were issued for Whether the carrier could ask the of lading from the customs warehouse
the two shipments, which arrived in customs warehouse to demand as this entity is not the final receiver of
Chile in late March 1999. Upon arrival an original bill of lading when the goods, neither is it an agent of the
in Chile, the goods were placed in delivering the cargo to the customs receiver of the cargo. This entity acts on
a licensed customs warehouse,2 in agent. behalf of customs to ensure that duties
accordance with the provisions of local are paid and all legal requirements
law. After the customs clearance took The conclusions of the court were the are fulfilled. The first conclusion of
place, the cargo was delivered to its following: the court was that an ocean carrier
Chilean buyers, who had not paid part The handing over of the cargo to carrying goods to Chile is not obliged,
of the sale price to the shippers in Hong a customs warehouse does not as a matter of the customs law of
Kong, while the bills of lading remained constitute delivery by the carrier; it Chile, to deliver goods to the physical
with the banks. The court decided in is merely an act by which the goods possession of customs, but only to
favour of the unpaid shippers of the come within the jurisdiction of a customs warehouse licensed by
cargo. customs, but not into its possession. customs and subject to the jurisdiction
There is nothing preventing the of customs. Customs does not deliver
Background customs warehouse to demand the goods. The cargo does not come
The procedure for delivery of cargo in from the customs agent the original into the possession of customs but
Chile is peculiar, inasmuch as local law bill of lading, although it was only within its jurisdiction. The handing
provides for the carrier to hand over accepted that this was unusual, as over of the cargo by the carrier to the
the cargo to a customs warehouse customs warehouses usually rely on customs warehouse does not constitute
for subsequent delivery to the final the legalised import declaration to proper delivery of the cargo. It is not a
consignee. ascertain who the rightful receivers delivery of the goods in the sense that
are. this relinquishes the carriers control
An article about delivery of cargo in It is possible for the carriers to enter over and responsibility for them. As
Chile appeared in Gard News issue into contracts with the customs customs never takes possession of the
No. 138. It explained that according to warehouses whereby the latter are goods, they do not become responsible for
the system in Chile the cargo remains instructed to insist on presentation the goods or for their correct delivery.
in deposit until customs has granted of the original bill of lading for the Such responsibility remains with the
clearance for it to be delivered to delivery of cargo. warehouse operators. The court
the rightful owner or his servants or pointed out the distinction between
agent, which occurs once the customs The court reached its decision based the warehouse being within and subject
authority is satisfied all the applicable upon evidence and testimonies to the jurisdiction of customs and the
requirements have been met. The submitted by two eminent Chilean warehouse being treated as if they were
general understanding at that time lawyers, who assisted the court in part of customs. In performing their
was that under Chilean law the carrier understanding how the delivery of functions, the warehouse operators
could not be reasonably held liable cargo operates in Chile. The reasoning were not carrying out any delegated
for wrongful delivery, because he had of the court is very logical and function of the state, save in relation to
delivered the cargo to the person to straightforward. However, reality may obligations owed to customs such as
the collection of taxes.

1
Utaniko Ltd. v. P&O Nedlloyd BV (2002) All ER (D) 84 Feb.
2
Cargo entering Chile is placed in the custody of warehouses licensed by customs and remains there until customs has granted clearance for the cargo
to be delivered.
3
A customs agent or broker is a person licensed as such by the customs authority, albeit independent from the latter, who represents the legitimate
owner of the cargo and acts on his behalf before customs to obtain delivery of the goods.

Gard AS, March 2011


45

As a result of the above conclusion, the representatives themselves gave person to his order or to the bearer.
following clause, contained in the bills of evidence to the effect that, although
lading, did not protect the carrier against the carriers agents acted on the basis Substance and mode of
the misdelivery claim: If the carrier is of the customs agents statements, they performance
obliged to hand over the goods into could ask for the original bill of lading; As a matter of English law, the
the custody of a customs, port of other the customs agent would in effect be obligation in bailment and contract
authority, such hand over shall constitute bound to produce it, as otherwise he upon the carriers is only to deliver
due delivery to the Merchant under the bill would be denounced to customs who against presentation of an original
of lading. would then check his file to see if it bill of lading. However, in the present
contained the original. case the carriers relied on the
The courts conclusion also implies that distinction under Article 10 of the Rome
in the event of misdelivery by customs a The third conclusion of the court was Convention between the substance of
claim against them by owners is likely tothat, although cargo imported into that obligation and the manner and
be unsuccessful. Chile had to be delivered into customs mode of its performance. The court
warehouses, the carrier could choose then ruled that to the extent that the
The second conclusion of the court was the customs warehouse to which law of Chile contained provisions
that nothing prevented the customs the goods were to be delivered and specifying the manner in which cargo
warehouse from demanding the original contract with that warehouse operator in Chile had to be delivered, it must
bill of lading from the customs agent. on terms that the goods should only be correct to have regard to the law of
Also, there was nothing in the status be delivered against presentation of a Chile. So for example, under Chilean
of a customs agent that obliged a bill of lading. A prudent carrier should law the original bills of lading have to
customs warehouse operator to accept do so to fulfil his obligations under the be retained by the customs agent. They
his entitlement to demand the goods bill of lading to the lawful holder of that can only be presented to the carrier
without presentation of an original bill bill of lading to deliver only against and have to be returned (marked if
of lading. It is important to consider presentation of an original bill of lading. necessary to show delivery has been
the question from the point of view In cases where the original bill of lading made); to that extent Chilean law
of the carrier, as opposed to customs. is not available, a non-negotiable copy modifies the obligations under the bill
Although the warehouse operator certified by the bank (who will be the of lading. Citing a previous decision,4
could not be given instructions that consignee) could possibly be used. the judge agreed that, if it were a
contradicted the public duty entitling requirement of the law of the place of
the customs agent to withdraw the Another important conclusion of the performance (Chile) that the cargo must
goods once the customs requirements court was that there was no custom be delivered without presentation of
were complied with, that only applied of the ports of Chile that a carrier can an original bill of lading, the carriers
to the duties of the warehouse operator discharge its delivery obligations as would have performed their obligations
as regards customs. It did not affect set out above by delivering cargo to under the contract of carriage. Any
obligations that arose under the customs warehouses or that they could other conclusion would mean that
contract of carriage and instructions be delivered without presentation of a the contract could not lawfully be
could be given as regards obligations bill of lading. performed, which could not have been
under the contract of carriage not intended by the parties. The same
inconsistent with that public duty. The obligation to deliver against the would apply if there were a custom.
The court determined that there was bill is clearly stated in Article 977 of However, custom in this context means
nothing in Chilean law that made it the Chilean Code of Commerce, which custom in its strict sense, and not mere
inconsistent with the public duties of a reads: practice. According to the court, the
customs warehouse operator for that The bill of lading is a document which obligation under the bills of lading
operator to be required by private establishes the existence of a contract in English law contemplated the bill
contract between him and the carrier to of maritime transport and verifies that being surrendered to the carrier and
demand presentation of an original bill the carrier has taken charge of or has kept by him, but the modification in
of lading before delivering the goods loaded the goods and has undertaken the manner of the discharge of that
after they had been cleared through to deliver them against the presentation obligation under Chilean law was not
customs. The carriers Latin American of that document to a determined inconsistent with the basic obligation

Gard AS, March 2011


46
under the bills of lading in English law sensible and logical when examined in against production of that original
to deliver against presentation of the the light of Chilean law as to delivery bill of lading.5 Accordingly, members
bill of lading. of cargo. Moreover, under Chilean are advised to always ensure that the
law, as under English law, a carrier is appropriate instructions are issued to
Conclusion afforded protection against misdelivery the warehouse operators to only deliver
The case highlights the difference claims if he delivers against the original against the original bill of lading and
in view within Chile itself as to bill of lading. The present procedure that such instructions are followed. It
when proper delivery takes place of handing cargo over to customs should be noted that, for the purpose
in circumstances when the carrier is warehouses does not mean that the of the Club Rules, the important point
required to hand the cargo over to owner is thereby unable to avail himself is that delivery is made against the
customs. There appears to be no of this protection. In fact, according original bill of lading by the member
judicial authority from Chile on this to the legal advice from Chile, it is or his appointed agent and it will not
point. As a result, the English High perfectly possible for the carrier to be sufficient for the member to simply
Court heard expert legal views from issue appropriate instructions to the issue the instructions in this respect.
Chilean lawyers. Having heard both warehouse operator in this respect. Members are further advised to ensure
views, it preferred the interpretation that contracts with the warehouse
that the procedure of handing over From a Club cover point of view, the operators provide a clear recourse
cargo to the customs warehouse did decision has added clarity at least action in the event that the instructions
not relieve the carrier of subsequently from an English legal perspective as are not complied with, since the carrier
ensuring that delivery is made to to whether such misdelivery claims are will not be insured for any subsequent
the rightful owner of the cargo and, covered under the P&I policy. Club misdelivery claim.
therefore, if the customs warehouse cover will be available for misdelivery
misdelivers the cargo, the carrier is claims unless the claim concerns a
ultimately responsible to the cargo negotiable bill of lading and the claim
claimant. This view appears to be arises from the carriers failure to deliver

4
The Sormovsky (1994) 2 Lloyds Rep 266.
5
See Rule 34 (1)(i).

Gard AS, March 2011


47

Delivery orders Gard News 153,


March/May 1999

However, it often happens that a seller


who has shipped goods will issue a
merchants delivery order addressed
to the carrier instructing delivery of
part, or all, of a consignment in the
carriers possession to a specific party.
In cases where a merchants delivery
order is issued by a third party and
presented to the ship, it is necessary
that it is attorned by the carrier
before it becomes binding on him.
Attornment simply amounts to an
acknowledgement by the carrier that
he accepts the instructions contained
in the delivery order. Until such time
as attornment occurs, the merchants
delivery order is ineffective and
unenforceable against the carrier.

Once a merchants delivery order is


attorned, it is identical in all respects to
a ships delivery order.

Where the carrier issues his own


delivery order, attornment is, of course,
Often in the bulk cargo trade (and to a ships delivery order are references unnecessary, as he is already bound by
sometimes in other trades) delivery to any document which is neither a bill the terms of the document.
of cargo is made pursuant to a of lading nor a sea waybill but contains
delivery order. The delivery order can an undertaking which (a) is given under The legal and practical effects of
for example reflect a part of a bulk or for the purposes of a contract for the the delivery order risks involved
consignment covered by a single carriage by sea of the goods to which Under English law once a ships
bill of lading which has been sold to the document relates, or of goods delivery order is recognised as such
various buyers. As a bill of lading is not which include those goods; and (b) is an by COGSA 1992, it transfers the rights
divisible, the delivery order allows parts undertaking by the carrier to a person against the carrier under the contract
of a cargo to be apportioned between identified in the document to deliver of carriage from the shipper to the
various receivers who are entitled under the goods to which the document person identified in the delivery order.
the delivery order to claim delivery from relates to that person. This means that the holder of the
a vessel. In this respect delivery orders delivery order can bring an action
share similar characteristics with bills The essential characteristics of this against the carrier on the terms of the
of lading. Delivery orders also appear provision are that in order to achieve contract of carriage as if he had been
in cargo release procedures, whereby legal recognition as a ships delivery a party to that contract.1 In this respect
the consignee receives a delivery order order a document must contain an the delivery order is similar to a bill of
in exchange for the original bill of undertaking from a carrier who is in lading as a vehicle for the transfer of
lading after payment of all outstanding possession of goods to deliver them rights against the carrier. Consequently,
charges. to an identified party. The effect of the carrier is bound by the terms of
the undertaking must, either expressly the contract evidenced by the delivery
Ships delivery orders and or impliedly, give the identified party order (i.e., the contract under or for
merchants delivery orders the right to require delivery from the the purposes of which the undertaking
In discussing delivery orders, a carrier of the goods mentioned in contained in the order is given),2 but will
distinction may be drawn between a the document. Thus, for example, a also have the benefit of any limitations
ships and a merchants delivery order. document which authorises an agent of liability contained therein. A delivery
Ships delivery orders have been to release goods to a third party is not order therefore shares many of the
defined by the English Carriage of a ships delivery order as it does not features of the bill of lading as it will
Goods by Sea Act 1992 (COGSA 1992) give a right to the third party against operate as a receipt for the goods and
in section 1(4): References in this Act the ship. as evidence of the terms of the contract
of carriage.

1
See Section 2 of COGSA 1992.
2
See Section 5 of COGSA 1992.

Gard AS, March 2011


48
What are the practical of lading would prima facie be entitled A delivery order should contain
ramifications of the above for a to delivery of the goods. However, the same remarks in respect of the
shipowner? the holder of the delivery order would condition of the cargo at the time of
The carrier must be aware that if a be entitled to claim damages for his loading as the underlying bill of lading.
document presented to him contains losses from the carrier. Thus when
an undertaking by him that delivery issuing or attorning to a delivery order It is recommended to adopt a prudent
will be made, such a document places carriers must ensure that all original practice in connection with the issuance
the bearer in substantially the same bills of lading have been surrendered. of delivery orders. Such documents
position as the holder of a bill of lading. Similarly, carriers must ensure that the are undoubtedly of legal and practical
A delivery order should therefore only quantities stated in single or multiple value and could create complications
be issued in exchange for all original delivery orders accurately reflect the if not issued in strict conformity with,
bills of lading. If the original bills of quantities stated in the bill of lading. and in exchange for, the relevant bill of
lading are not returned it is easy to In the event all original bills of lading lading.
imagine that problems can arise if both have not been surrendered Gard would
a bill of lading and a delivery order recommend that a delivery order is
covering the same cargo are presented issued only against a letter of indemnity
to the carrier. As a delivery order is not a on acceptable terms and backed by
document of title, the holder of the bill sufficient financial security.

Delivery of cargo in Chile


Gard News 171,
August/October 2003

revisited
A slight change to practice regarding customs agent shall be obliged to legal purposes, as it is now).
delivery of cargo in Chile is expected to surrender the original bill of lading to the carrier (or his agent) will signal
take effect shortly. the carrier prior to delivery of cargo in electronically to customs that this step
exchange for an authorised copy. has been carried out and delivery
Readers may recall from previous The idea is that the submission of will take place by customs, via the
articles in Gard News1 that according documents and data regarding each warehouse keeper acting on its behalf,
to Chilean law the carrier must deliver import and export operation be done to the (hopefully) rightful consignee.
cargo to a customs warehouse on-line (although there is no mention
within 24 hours after being unloaded of electronic bills of lading as yet). The The system, which has been named
from the vessel. The cargo is kept new system promises to include the Isidora, was not yet operational at the
in the warehouse until all customs carrier (or his agent) in the delivery time of going to press. Gard News will
formalities are dealt with and customs process as follows: inform readers as and when the change
grants clearance to the consignee. the receiver (or his customs agent) actually comes into force, so that
At present, the customs agent may must submit an original bill of lading operators may forewarn their masters/
present the original bill to the carrier to the carrier (or his agent), who should local agents.
but the original bill must be returned recognise it as authentic and verify its
to customs and kept in its files for five endorsements, etc. We thank Cave & Cia, Valparaiso, for
years. the carrier retains the original bill of the above information.
lading and in its stead hands over an
However, there are plans to implement authorised copy which will serve for
changes to this system whereby the all customs purposes (instead of all

1 Delivery of cargo in Chile in issue No. 138 and Delivery of cargo in Chile An English law perspective in issue No. 167.

Gard AS, March 2011


49

A message to all shipowners who agree Gard News 155,


September/November 1999
to deliver cargo against anything other
than a true original bill of lading

The case of Motis Exports Ltd. v. and the issue of fault does not arise. On without the original negotiable bill of
Dampskibsselskabet AF 1912, A/S this basis, delivery against a forged bill lading being tendered.
and another,1 decided earlier this year of lading was held to be an intentional
in the English High Court, should act inconsistent with the rights of the There is a further problem for
send a shiver down the spine of every true owners. Finally, the judge found shipowners. As stated above, the judge
shipowner who has even thought that the clause in the bill of lading found that the shipowners had acted
about delivering a cargo against relieving the carrier from liability for the intentionally when delivering the
anything other than the true original goods after discharge did not cover a goods against the forged bills of lading.
bill of lading, although the defendant situation where the goods had been The point does not seem to have
shipowners in the Motis case may well misdelivered. The shipowners were thus arisen in this case, but one wonders
regard themselves as much the victims condemned on all counts. what impact this finding would have
as the plaintiff shippers. had if the shipowners had tried to limit
The value of the goods was not stated their liability under the 1976 Limitation
The facts may be summarised as in the judgment, but was presumably Convention. It will be recalled that
follows. The shippers sued the substantial. Interest and legal costs will Article 4 of this Convention states that:
shipowners on the basis that the latter have been in addition. It is probable
had misdelivered the goods (for which that all these costs will be solely for A person liable shall not be entitled
the shippers had presumably not been the shipowners account, as all the P&I to limit his liability if it is proved that
paid) without production of the original Clubs within the International Group the loss resulted from his personal act
bills of lading. The shipowners seem to have Rules which exclude cover for or omission, committed with the intent
have conceded that they had done so, liabilities, costs and expenses arising to cause such loss, or recklessly and
since their main defence was that they out of the delivery of goods without with knowledge that such loss would
had delivered the goods against forged production of an original negotiable bill probably result (our emphasis).
original bills, which they had no way of lading. In this case, the shipowners
of knowing were forged. On this basis, were particularly unfortunate, in that Unfortunately for shipowners, there
they said they had not deliberately they had no knowledge of the forged are no steps which will guarantee they
misdelivered the goods and were bills of lading and appear to have are protected in such a situation. Even
therefore not at fault. As a second line acted in a way consistent with normal refusing to deliver goods other than
of defence, they argued that a clause in commercial practice. Since they had against an original negotiable bill of
the bills of lading which provided that no idea that the bills of lading were lading will not avoid the problem which
the carrier had no liability for the goods forged, it is assumed that they saw no the shipowners faced in this case.
after discharge should be effective. need for and did not obtain a letter of Moreover, since the judge effectively
indemnity, which is commonly obtained found that liability was, to some extent,
The court found the shipowners liable. in situations where shipowners take the strict, any defence against a claim from
Firstly, the judge said that the fact that commercial decision to deliver goods the rightful owner of the goods seems
the carrier was unaware of the fraud
(i.e., the forged bills of lading) was
no defence to the claim. There was
nothing in the contract which gave the
shipowners such a defence and it was
neither reasonable nor necessary to
imply such a term. Reasons of public
policy also dictated that, although both
parties were innocent of the fraud, the
shipowners had responsibility for the
integrity of their bills of lading and for
the proper delivery of the goods.

Further, the judge held, the shipowners


were liable for conversion of the goods,
conversion being a recognised tort
under English law. The judge quoted
with approval a 1968 case2 which stated
that, in circumstances such as these, the
tort of conversion is one of strict liability

1 (1999) 1 All ER 571.


2 Marfani & Co. Ltd. v Midland Bank Ltd. (1968)
2 All ER 573.

Gard AS, March 2011


50
doomed to fail. In these circumstances, of authority is always given to charterers anything more. However, in the one in
owners best hope of recovery probably or their agents. The charterparty should a thousand case where something does
lies in an indemnity claim against the also explicitly state that the authority go wrong, the shipowners are left with
charterers. The merits of such claim given to charterers to issue and sign no defence to the claim by the rightful
will depend largely on the terms of the bills of lading is only as set out in the owner of the goods,
particular charter party. One important letter. The Association can assist with with no P&I cover,
area is the authority granted by owners the wording of either a charterparty with possible difficulties in limiting
for the charterers or their agents clause or a letter of authority, or both. their liability,
to issue and sign bills of lading on with little or no chance of obtaining
behalf of the Master. When a vessel is The circumstances of the Motis case are an indemnity from anyone else.
operating under a time charter, owners unusual. The forgery of bills of lading
rarely have any idea of what bills of is not common. What is common is It is not a comfortable position in which
lading have been issued and signed on that, almost daily, shipowners take the to be.
their behalf. Under English law, the right commercial decision to deliver goods
of charterers to sign bills of lading on against something other than the
behalf of the shipowners will normally original negotiable bill of lading. The
be implied, at least into certain forms legal principles which the Motis case
of charter party, such as the NYPE has decided will apply to all matters
form, even if there is no formal letter which fall to be decided in accordance
of authority. Owners may therefore with English law. No doubt in 999 out of
be able to obtain some protection by 1,000 cases, everything goes smoothly
ensuring that a suitably worded letter and the shipowners never hear

English law Misdelivery


Gard News 171,
August/October 2003

in Chile A follow-up
As reported in an article in Gard News to the Chilean buyers, who had not The judgment was appealed and
issue No. 167,1 a recent decision of the paid part of the sale price to the although the points dealing with the
English High Court2 challenged the shippers, while the bills of lading Chilean delivery procedure were not
general perception of responsibility of remained with the banks. The court re-considered, the Court of Appeal
the carrier in the process of delivery decided that the handing over of the confirmed that the carriers were liable
of cargo in Chile. The Court of Appeal cargo to a customs warehouse did not for misdelivery.4 They were in breach
has now confirmed that where a carrier constitute delivery by the carrier; it was of their duty in bailment by virtue of
parts with possession of the goods to merely an act by which the goods came their failure either to deliver the goods
third parties prior to delivery, he must within the jurisdiction of customs, but to a person entitled to them against
ensure that the third parties deliver the not into its possession. It was possible presentation of an original bill of lading
goods only against presentation of an for the carriers to enter into contracts or, when they parted with possession
original bill of lading. with the customs warehouses whereby of the goods to third parties before
the latter were instructed to insist on delivery, to arrange for the third
Two unpaid shippers brought claims presentation of the original bill of parties to be under a similar obligation
against their respective ocean carriers lading for the delivery of cargo. Carriers regarding delivery.
for alleged delivery of cargo in Chile were held responsible for misdelivery
without production of original bills since they had failed to instruct the
of lading. Upon arrival in Chile, the warehouse operators or the relevant
goods had been placed in a licensed entity empowered under Chilean law
customs warehouse, in accordance to issue a temporary import permit
with the provisions of local law.3 After for containers (the container operator)
the customs clearance took place, the to ensure that delivery was given only
cargo was delivered by the warehouse against an original bill of lading.

1
Delivery of cargo in Chile An English law perspective.
2
Utaniko Ltd. v. P&O Nedlloyd BV [2002] 2 Lloyds Rep.182.
3
According to the system in Chile the cargo is handed by the carrier to customs warehouses and remains in deposit until customs has granted clearance
for it to be delivered to the rightful owner or his servants or agent, which occurs once the customs authority is satisfied all the applicable requirements
have been met. The general understanding was that under Chilean law the carrier could not be reasonably held liable for wrongful delivery, because he
had delivered the cargo to the person to whom local law required him to deliver it, i.e., to the customs authority. However, readers should be aware that
changes to the procedure currently followed in Chile may be implemented shortly. See article Delivery of cargo in Chile revisited in this issue of Gard
News.
4
[2003] 1 Lloyds Rep. 239.

Gard AS, March 2011


51

English law Straight Gard News 171,


August/October 2003

bills of lading - One more


piece in the puzzle
The English Court of Appeal has of the Hague-Visby Rules. Although According to Professor Debattista,
recently held that a straight consigned it is unclear whether the decision the problem does not lie with the
bill of lading expressly requiring would have been the same had the judgment in the RAFAELA S, but first,
presentation for delivery is a similar bill of lading not expressly required with the decision to exclude straight
document of title for the purposes of presentation for delivery, Rix LJ made bills from the definition of bills of lading
the Hague-Visby Rules. it clear that in his view this would have in COGSA 1992 and then, bizarrely, to
made little difference. characterise as sea waybills documents
The question of whether a straight calling themselves bills of lading; and
bill of lading is a document of title In a recent article4 Professor Charles secondly, with the decision to include
is relevant not only in respect of Debattista rightly points out that section 4, dealing with the evidential
applicability of the Hague-Visby Rules, following the Court of Appeal decision force of bills of lading, in the 1992 Act,
but also in respect of the carriers straight bills now sit somewhat an Act focusing on another matter
delivery obligation. An article in Gard uncomfortably across two English entirely, namely the buyers title to sue
News issue No. 1691 commented on the statutes relating to the carriage of the carrier in contract.
English Commercial Courts decision in goods by sea. COGSA 1992 considers
the case of the RAFAELA S,2 in which straight consigned bills to be sea As explained in the article in Gard
the court had to consider whether a waybills. This means that the consignee News issue No. 169, P&I cover does not
straight bill of lading was a bill of has contractual rights under the include liabilities arising out of delivery
lading or similar document of title and contract of carriage, including a right to of cargo under a negotiable bill of
therefore covered by Article I (b) of the delivery at discharge without presenting lading without production of that bill by
Hague-Visby Rules, or whether it was the document, and does not enjoy the person to whom delivery is made.
not a document of title so that the UK the benefit of the estoppel granted by Accordingly, liability for misdelivery
Carriage of Goods by Sea Act 1971, section 4 of COGSA 1992 binding the under a straight bill of lading is not
which brings into effect the Hague- carrier to statements about the goods automatically excluded from cover in
Visby Rules, did not apply. As the words on the bill of lading. On the other hand, those cases where straight bills are not
order of, or others of similar effect, after the RAFAELA S a straight bill is to treated as negotiable instruments.
did not appear in the bills consignee be considered as a bill of lading for the
box, the court decided that the bill purposes of COGSA 1971, which means A more in-depth legal analysis of the
was non-negotiable and as such fell that, at any rate where the bill expressly current state of English law applicable
outside the definition of a bill of lading requires presentation, the consignee to straight bills of lading and the
or similar document of title and the must present the document for delivery practical consequences to carriers will
Hague-Visby Rules did not apply. and, according to Rix LJ, this is likely be published in the next issue of Gard
to be the case even where the straight News. In the meantime members are
Cargo interests lodged an appeal and consigned bill does not expressly so advised to proceed with caution and
in April 2003 the Court of Appeal held3 require. In addition, the consignee deliver cargo carried under straight bills
that a straight consigned bill of lading now takes the benefit of the estoppel of lading only against presentation of
expressly requiring presentation for created by the second sentence of an original.
delivery was a similar document of Article III (4) of the Hague-Visby Rules
title for the purpose of the Rules and binding the carrier to statements about
was therefore covered by Article I (b) the goods on the bill of lading.

1
Straight bills of lading Not so straightforward.
2
[2002] 2 Lloyds Rep. 403.
3
[2003] EWCA Civ 556, 16th April 2003; LMLN 0613 dated 15th May 2003.
4
Straight bills come in from the cold or do they? in Lloyds List, 23rd April 2003.

Gard AS, March 2011


52

Straight bills of lading Gard Services Loss Prevention


Circular 13-02, November 2002

Delivery Do your bills


use clear words?

Introduction bill of lading should only be against the words to order or others similar.
There have recently been a number of production of an original bill, such However, the face of the bill contained,
court cases questioning the status and production is not necessary under a in another body of text, the printed
functions of a straight bill of lading. straight (non-negotiable) bill of lading, words consignee or to his or their
A straight bill of lading is generally i.e., delivery need only be made to the assigns and these were the only
accepted to be one completed in such properly identified named consignee. words on the face of the bill indicating
a way that delivery is to be made to the As mentioned in Gards Guidance on negotiability or otherwise. Since those
named consignee only. Accordingly, Bills of Lading, however, and in light words are accepted to mean to
it is not a transferable or negotiable of recent case law, that view is over- order, the court decided that made
document of title, which can be used to simplistic and indeed dangerous. If the bill negotiable.
transfer title (the right to possession) to care is not taken, the carrier risks facing
the goods, covered by that document. claims for misdelivery. Whilst this case did not concern a
Bills of lading that are made out to misdelivery claim, it nevertheless
order are, by endorsement, negotiable The problem demonstrates that, if the intention is
documents of title. Bearer bills of lading In a recent case before the English to issue a straight non-negotiable bill,
are negotiable without endorsement. courts, THE HAPPY RANGER1, the bill clear words must be used (and other
of lading appeared to be a straight words should not conflict with them)
The commonly held view is that, bill - the consignee box showed only a to show that the bill is in fact a straight
whilst delivery under a negotiable named consignee and did not contain non-negotiable bill. If not, the bill will

1 [2001] 2 Lloyds Rep. 530 and [2002] 2 Lloyds Rep. 357.


2 [2002] 3 SLR 176 and Civil Appeal No. 18 of 2002.
3 It contained the printed words (non-negotiable unless consigned to Order) and the words to order did not appear in the bill that was issued, either
next to the named consignee or elsewhere.
4 See for example the RAFAELA S [2002] 2 Lloyds Rep. 403

Gard AS, March 2011


53
probably be deemed to be negotiable As a result, the Singapore courts found The document issued should of
and the carrier will be obliged to deliver the carrier liable for the misdelivery course properly reflect what has
the goods only against production of an claim. Less recent English case law been agreed with the shipper.
original bill. suggests that the requirement for clear If a non-negotiable document
words may be correct. Carriers should is sufficient, a sea waybill will
In another recent case, which did therefore ensure that, where the bill is a usually be most appropriate. If
concern misdelivery, the carrier had straight non-negotiable bill, it contains a sea waybill5 can not be issued,
delivered the cargo without production clear words permitting the carrier to it is suggested that the straight
of an original bill. The shipper had deliver the goods without production of bill should also contain words
retained the original bills (all three) an original bill. (handwritten or stamped to give
because the buyer/consignee had not preference over printed words)
yet paid in full, and when he failed to Recommendations such as where non transferable/
do so, the shipper sued the carrier. The In consideration of the above recent negotiable, the carrier is entitled
case, Voss Peer v. APL Co Pte Ltd2, was court cases, Gard Services recommends to deliver the goods to the named
brought before the Singapore courts. Members and clients to: consignee without surrender of an
Check their standard form bills, original bill of lading, and is obliged
The bill of lading form was, as is particularly those designed for to do so unless the shipper requests
increasingly commonplace, designed various circumstances including otherwise before delivery takes
for various circumstances including when the bill is to be negotiable place.
when the bill is to be negotiable and when it is to be non-negotiable.
and when it is to be non-negotiable. Where it is agreed that a non-
It was accepted that the bill was a Ensure that printed words in the bill negotiable document is to be
straight bill3. Notably, the bill of lading make it clear in what circumstances issued, that, together with the
contained printed words elsewhere on the bill will be a straight non- carriers delivery obligations
its face Upon surrender to the Carrier negotiable bill. For example, use thereunder, should preferably be
of any one negotiable bill of lading, of the words (B/L not negotiable reflected in booking confirmations.
properly endorsed, all others to stand unless order of) in the consignee
void. Under English law4 such words box. In case of doubt, cargo under
were recently interpreted to apply straight bills should not be
only when the bill was negotiable. By Ensure that other printed words, delivered without production of an
implication therefore, under a straight particularly on the face of the original bill, unless and until written
non-negotiable bill, the carrier was not bill, such as those in THE HAPPY consent has been obtained from
prevented from delivering the goods RANGER, do not conflict with the shipper.
without production of an original a bill which is intended to be
bill. The Singapore Courts disagreed non-negotiable. If those words Gard will be happy to review Members
and decided that clear words were cannot be deleted, or others more bills of lading and to provide guidance
required to reflect the intention of the appropriate used, it should be in light of the above.
parties to contract out of delivering the made clear that they only apply
goods without production of an original where the bill is negotiable. A more in-depth commentary on the
bill. cases referred to in this loss prevention
circular appears in Gard News 169
(February 2003).

5 Sea waybills expressly state they are non-negotiable and that delivery does not require production of an original sea waybill.

Gard AS, March 2011


54

Straight bills of lading


Gard Services Loss Prevention
Circular No. 06-03, June 2003

Do your bills use clear


words? (Part II)
Introduction bill was negotiable. The Court of The absence of printed words
Since Gards Loss Prevention Circular Appeal, however, disagreed and were requiring surrender of a bill of
No. 13-02 was published in December persuaded that the better view was lading to take delivery
2002, the case referred to in footnote 4 that the words reflected a requirement Whilst it was not necessary to do so,
of that circular the RAFAELA S has by the carrier that any bill presented Lord Justice Rix went on to give the
been appealed in the English Courts. should apparently entitle the holder to view (obiter) that a straight bill of lading
The Court of Appeals judgment1 claim delivery of the goods (as with a was, in principle, a document of title
contains some very important and bearer bill). The leading judge in the even in the absence of an express
useful guidance on how the English Court of Appeal (Lord Justice Rix) went provision requiring its production to
courts have in the past, and will in the on to say: obtain delivery. Rix went on to say:
future view straight bills of lading under
English law. The case also referred I do not regard it as a happy A shipper needs the carrier to
to the Voss Peer case mentioned in matter that the omission of adding assist him policing his security in
Circular No. 13-02 and to leading words or order in the consignee retention of the bill. He is entitled to
decisions in the courts of other box in this case (or the omission to redirect the consignment on notice
countries, such as Germany and the add a notify party in the form used to the carrier, and although notice
Netherlands. in the CHITRAL3), either of which is required, a rule of production
could have happened without of the bill is the only safe way, for
Although the RAFAELA S mostly deliberation at all, should have the the carrier as well as the shipper,
dealt with the question of whether effect of transforming a contractual to police such new instructions.
straight bills should be considered document which in every respect In any event, if proof of identity is
documents of title for the purposes looks and reads like a bill of lading necessary, as in practice it is, what
of the Hague/Hague Visby Rules2, into a sea waybill, when a sea waybill is wrong with the bill itself as a
the case clarifies how English law will commonly takes a totally different leading form of proof. This is of
in future view the carriers delivery form course an inconvenient rule where
obligations under such bills. One can the carriage is very short ... and that
also detect from the Appeal a certain If it had been intended that it [the is why sea waybills are used in such
amount of criticism towards carriers for printed paragraph containing the trades. But it is clear that straight
ambiguous wordings in their own bill of above words] should not apply when bills are used in intercontinental
lading forms and for not using waybills the bill was used in non-negotiable carriage and therefore the
instead of straight bills. It is particularly form, then it could very easily have inconvenience argument fails
important to note the following: said so. Against the background of
common forms of sea waybills, it is Therefore, regardless of whether words
Printed words requiring surrender truly remarkable that it does not say requiring production of a bill of lading
of a bill of lading to take delivery so to take delivery appear in a straight
Reference was made in Circular No. (and therefore non-negotiable) bill, such
13-02 to the printed words commonly Everyone seems to be agreed that a bill is likely to be regarded, at least
appearing on the face of most bills of if a straight bill expressly provides, as in principle under English law, to be a
lading, and which in the RAFAELA S it commonly does, that its surrender document of title and with that there
case were: is required for delivery to take place, will be a requirement for the production
then it is a document of title of an original bill to take delivery.
In witness whereof the number of
Original Bills of Lading stated above Therefore, if words such as those Words permitting delivery without
[viz 3] all of this tenor and date, has mentioned above appear in a straight the surrender of a bill of lading
been signed, one of which being (and therefore non-negotiable) bill of It is somewhat disappointing that the
accomplished, the others to stand lading they will be interpreted under Court of Appeal did not go as far as to
void. One of the Bills of Lading English law as giving the bill the consider the position when a straight
must be surrendered duly endorsed function of document of title and with (and therefore non-negotiable) bill does
in exchange for the goods or that a requirement for the production of expressly provide that delivery can
delivery order. an original bill to take delivery. take place without the surrender of an
original bill of lading, much in the same
At first instance, these words were way as a waybill does. The Court of
interpreted to apply only when the

1 Case No. A3/2002/0909.


2 If a straight bill was not deemed a document of title, the Hague/Hague Visby Rules would not apply under English law and the carrier would be free
to contract on terms more favourably than such Rules. If the Hague/Hague-Visby Rules had not applied in the RAFAELA S the more liberal package
limitation under the US Carriage of Goods by Sea Act would have applied.

Gard AS, March 2011


55
Appeal only went so far as to say: case The Kapetan Petko Voiveda 4
Summary
the Court of Appeal recognised that Whilst the recommendations in Circular
it seems to be common ground shippers have the option to negotiate No. 13-02 are still valid, the judgment of
that a document which does not acceptable carriage terms. There is no the Court of Appeal in the RAFAELA S
have to be presented to the carrier reason why this should not extend to must be considered a stark warning to
to obtain delivery of the goods any requirement for the production of carriers delivering cargo under straight
cannot be called a document of an original bill of lading under a straight (and therefore non-negotiable) bills
title (and therefore non-negotiable) bill. without production of an original bill
Accordingly, the remark suggested in of lading. An agreement between the
whatever may be the position Circular No. 13-02 to be inserted in a carrier and shipper to do so will be
as a matter of principle and in the straight (and therefore non-negotiable) required, along the lines suggested, in
absence of express agreement, [our bill of lading should minimise the order to minimise the carriers exposure
emphasis] the practice appears to be risk, under English law, of a carrier to claims for misdelivery.
that a straight bill of lading, unlike being found liable for misdelivery by
a mere sea waybill, is written in the delivering cargo without the production The case also supports a firm
form of an otherwise classic bill and of an original bill. recommendation to carriers and
requires production of the bill on shippers to use waybills instead of
delivery, and therefore transfer to a General straight bills in circumstances where the
consignee to enable him to obtain Lord Justice Rix concluded: functions of document of title (with the
delivery security that gives for the shipper) and
I am not unhappy to come to negotiability are not needed.
If it had been intended that it [the these conclusions. It seems to me
printed paragraph containing the that the use of these hybrid forms According to Rule 34 of Gards Statutes
above words] should not apply when of bill of lading is an unfortunate and Rules cover is excluded for
the bill was used in non-negotiable development and has spawned liabilities, costs and expenses arising
form, then it could very easily have litigation over the years Carriers out of the delivery of cargo under
said so. Against the background of should not use bill of lading forms if a negotiable Bill of Lading without
common forms of sea waybills, it is what they want to invite shippers to production of that Bill of Lading by
truly remarkable that it does not say do is to enter into sea waybill type the person to whom delivery is made
so contracts. It may be that ultimately except where cargo has been carried
it is up to the shipper to ensure that on the Ship under the terms of a non-
There is nothing in the RAFAELA S case the boxes in these hybrid forms are negotiable Bill of Lading, waybill or
which suggests any intention on the filled up in the best way that best other non-negotiable document, and
part of the English Courts to deviate suits themselves, but in practice I has been properly delivered as required
from properly constructing a contract suspect serendipity prevails. In any by that document
as agreed between the parties (i.e. event, these forms invite error and
a carrier and a shipper). In another litigation, which is best avoided by a
notable recent package limitation simple rule

3 [2000] 1 Lloyds Rep 529.


4 Daewoo Heavy Industries and Another v. Klipriver Shipping Ltd & Navigation Maritime Bulgares (Kapetan Petko Voiveda) English Court of Appeal:
Lords Justices Aldous, Judge and Longmore: [2003] EWCA Civ. 451: 3 April 2003.

Gard AS, March 2011


56

Bills of lading - Delivery of cargo Gard P&I member circular no.


3/2003, July 2003

- The Republic of Korea and the


Peoples Republic of China
(ii) It is not uncommon for Members
to be requested by charterers to
agree clauses in charter parties
which expressly provide for
the delivery of cargo without
production of bills of lading against
letters of indemnity. Members are
strongly advised not to accept such
clauses and it is recommended
that Members seek advice from the
Managers before responding to
such requests.

(iii) Members are advised not to accept


any personal guarantees offered
by a charterer or sub-charterer in
exchange for allowing cargo to
be delivered without production
of the bill of lading and not to
make delivery against copies of a
negotiable bill of lading.

To provide additional guidance to


protect Members discharging cargo at
ports in the Republic of Korea and the
Peoples Republic of China.

The Republic of Korea


At ports in the Republic of Korea,
cargoes are often discharged from
vessels and placed in a bonded
warehouse pending collection by the
cargo owner. The bonded warehouse
Members will be aware that liability The purpose of this Circular is: may be owned either by the consignee,
arising from delivery of cargo under a so-called self use bonded
a negotiable bill of lading without To remind Members of the following: warehouse, or by an independent
production of that bill of lading will company unrelated to the consignee.
not ordinarily be covered under the (i) that they should not deliver cargo In either case, it is the responsibility
Rules of the Association, unless the carried under a negotiable bill of of the carrier to be presented with an
Executive Committee of the Association lading without production of that original negotiable bill of lading before
in its sole discretion should decide bill of lading since any liability costs delivering the cargo. Under Korean law,
otherwise. In February 2001, we issued and expenses arising from such delivery takes place when control of the
a Circular to Members No.2/2001 action will not ordinarily be covered cargo is surrendered by the carrier or
recommending revised wordings of under the Rules of the Association. his agent to some other party, except
Standard Form Letters of Indemnity If Members nevertheless choose to in the case of CY/ CY (container yard/
and Bank Join In agreements for use deliver cargo without production container yard) cargo when delivery
by Members in circumstances where of the original negotiable bill occurs when the cargo leaves the
they are requested to deliver cargo of lading they are advised only container yard. Accordingly, in the case
without production of a negotiable bill to do so if they have received a of a self use bonded warehouse,
of lading. Since that time, a number of Standard Form Letter of Indemnity since control of the cargo is effectively
Clubs have noted that Members have and Bank Join In agreement as surrendered when the cargo leaves
experienced problems discharging and recommended in our February the carriers custody, usually at the
delivering cargo at ports in the Republic 2001Circular (No. 2/2001). In ships side, delivery takes place at this
of Korea and the Peoples Republic of that latter event, Members are point. In the case of an independent
China, where, following discharge and reminded to ensure that they are warehouse company, control of the
pending collection by the receiver, the fully satisfied with the financial cargo is not surrendered by the carrier
cargo is placed in a bonded warehouse standing and authority of those until it leaves the warehouse, at which
or a Customs controlled holding area. who are to issue and sign the time delivery takes place.
required indemnities.

Gard AS, March 2011


57
In a number of cases, cargoes have bear the loss, since P&I cover may number of steps that a Carrier should
been released from both independently already have been prejudiced. take to protect himself:
owned and self use warehouses
without production of the bill of lading. Again, Members should be aware that (i) If the carrier is requested to deliver
In certain of these cases, although the ultimate enforcement of an indemnity the cargo without production of
consignee has taken delivery of the depends upon a variety of factors, the original bill
cargo he has not been the bill of lading including the continued solvency of the of lading, he should only do
holder. Subsequently, the bill of lading party offering the indemnity. so subject to the provision of a
holder, usually a bank, has claimed Standard Form Letter of Indemnity
against the carrier when it has been Where a notify party is named in the and Bank Join In agreement as
unable either to obtain payment from bill of lading, often the cargo owner or referred to above.
the consignee or to recover the goods a bank, that party should be consulted
themselves. before the carrier surrenders control of (ii) A carrier is not obliged to deliver
the cargo. cargo without production of the
There are a number of steps that a bill of lading, and may retain
carrier can take to protect himself. Members are also warned not to custody of the cargo until it is
deliver cargo at Korean ports against produced or until a Standard Form
(i) If the carrier is asked to surrender the presentation of a negotiable bill of Letter of Indemnity and Bank
control of and, accordingly, deliver lading without first having verified that Join In agreement is provided.
the cargo without production of it has been endorsed in favour of the Furthermore, it may in certain
the bill of lading, he should only holder. The Managers are aware that, circumstances be possible for the
do so subject to the provision of a in the past, Korean banks have been carrier to apply to the Courts for an
Standard Form Letter of Indemnity prepared to release an original bill of appropriate order providing that
and Bank Join In agreement as lading to the local receiver without cargo can only be released against
referred to above. endorsement in his favour in order to production of the bill of lading.
facilitate discharge and delivery, whilst
(ii) A carrier is not obliged to at the same time providing extended (iii) Alternatively, the Carrier may
discharge cargo to a self credit terms. The Korean Courts have consider discharging cargo into the
use warehouse. If there is an found such delivery by a carrier to custody of the customs authority
alternative, the carrier can insist be wrongful. with a protective agent or legal
that the cargo be discharged representative being instructed,
into an independently owned The Peoples Republic of China subject to the terms referred to
warehouse. Alternatively, the carrier At ports in the Peoples Republic of in paragraph (B) 1.(iii) above. The
may retain custody of the cargo China, cargoes are often discharged Managers would also recommend
until production of the bill of lading from vessels to Customs controlled that, where permitted, a lien be
or until a Standard Form Letter warehouses or holding areas pending immediately placed on the cargo
of Indemnity and Bank Join In collection by the cargo owner, against to ensure that delivery does not
agreement security is provided surrender of the bill of lading. In a take place without the payment of
number of cases, forged bills of lading storage charges incurred.
(iii) Where the carrier discharges have been used to obtain delivery of
cargo into an independently cargo, possibly with the knowledge These recommendations apply equally
owned warehouse, he is advised of Customs officials, agents clerks or to shipowners and charterers entered in
to contract with the independent employees of the terminal operators. the Association.
warehouse owner on terms which In at least one case, a high level anti-
provide that the warehouse owner corruption investigation was conducted Yours faithfully,
shall not deliver the cargo without resulting in a number of Customs
production of the bill of lading officials being arrested. GARD SERVICES AS
or without the carriers consent As agent only for Assuranceforeningen
and that the warehouse owner Since effective control over the cargo Gard -gjensidig-
shall indemnify the carrier should in ports in the Peoples Republic of
cargo in fact be delivered without China may be difficult for a carrier to Claes Isacson
production of the bill of lading or monitor following discharge, and rights Chief Executive Officer
the carriers consent. However, if of recourse against Customs officials,
that indemnity is not enforceable in ships agents and terminal operators
practice, the Member may have to may not be available, there are a

Gard AS, March 2011


58

The missing bill of lading


Gard News 152,
December 1998/February 1999

Unfortunately for the shipowner, the bill constructive possession of the goods of the goods to any person except on
in question, rather like the White Rabbit represented by that bill of lading, production of the bill of lading 2. The
in Alice in Wonderland, is often late and thereby enabling it to be used, inter alia, shipowner will therefore be afforded
sometimes never makes it to the party to sell the goods on (sometimes several protection if he delivers to the person
at all. This was confirmed by the Master times) while they are still in transit. presenting the original bill of lading.
in the case of the SAGONA 1, when Moreover, if a set of three bills of lading
he advised the court that in his 14 years The negotiable bill of lading is is issued, the shipowner is safe if he
of sailing as a Master, he had never seen therefore fundamental to international delivers against the first original of the
a bill of lading! The case of the missing trade. The shipowner is under an set presented to him 3.
bill has led to various practices designed obligation to deliver the cargo to the
to enable the shipowner to deliver the person entitled to it. In the face of the The above rule is, however, subject to
cargo, all of which, for one reason or various endorsements (or even one the overriding proviso that the owner
another, are largely unsatisfactory from endorsement) on a bill of lading, he is or Master is not aware of any other
the shipowners point of view. presented with a dilemma as to whether competing claim of ownership of the
the party claiming delivery is, in fact, so cargo. If the shipowner is so aware,
The background to this difficult and entitled. Recognising the shipowners he should not deliver without first
perennial problem is the pivotal role problem, the English courts have investigating the entitlement of the
of the negotiable bill of lading in devised principles designed to enable person presenting the bill of lading. If he
international trade arising from its use, him to deliver the cargo safely. The most has no notice of such claims and there
developed by custom, as a document important of these is that, where a bill of is no other indication to him that the
of title. In effect, possession of the lading has been issued, the shipowner holder is not so entitled, he will be safe
negotiable bill of lading amounts to is not obliged to surrender possession in delivering to the person presenting

1 [1984] 1 LLR 198.


2 See the STETTIN [1889] 14 PD 142
3 See Glyn Mills & Co. v. East and West India Dock Co. [1882] 7 A.C. 596.

Gard AS, March 2011


59
the bill and will be protected from delivering the goods to someone who the cases relating to the shipowners
subsequent claims even when they are does not have the bill of lading the exercise of a lien for non-payment of
made by the true owner of the goods. owner will be exposed to a claim for freight 4.
breach of contract by whoever is entitled
The sound commercial sense of this rule, to possession of the cargo. This construction is, however, subject to
and the protection thereby provided the overriding principle that a shipowner
to the shipowner, is one reason why Where there is such a breach of contract cannot delay his vessel unreasonably. If,
delivery without production of the resulting in misdelivery the courts may therefore, when exercising the lien, the
negotiable bill of lading is excluded decide that, on a true construction shipowner is able to discharge his cargo
from the P&I cover provided by this of the terms in the bills of lading, safely (such as into safe storage or even
Association and all the other P&I Clubs the shipowner may not rely upon the to the consignee but to his order and
within the International Group. The exclusion clauses contained in that bill of under his control) but retains control of
exclusion of cover is contained in Rule lading. In addition, the carrier may also the cargo pending delivery of the bill
34.1.b(i) of the Associations Rules, be sued separately for misdelivery under of lading, it is suggested that he should
which provides that the cover otherwise the tort of conversion, in which case, the do so. If he unreasonably fails to do so,
available under Rule 34.1 does not shipowner may be unable to call upon he may be precluded from claiming
include: any contractual exclusion clause which, damages for any subsequent delay or
under the bill of lading, would otherwise demurrage 5. If therefore, the same rules
(i) liabilities, costs and expenses have protected him from liability. and principles apply when the shipowner
arising out of delivery of cargo under delays discharge pending arrival of the
a negotiable bill of lading without Furthermore, and perhaps most ship, shipowners are advised to always
production of that bill of lading by importantly for the shipowner, if delivery consider whether the cargo can be safely
the person to whom delivery is made is made without production of the bill of discharged. If it can, and the shipowner
except where cargo has been carried lading the shipowner will be deprived unreasonably refuses to do so, he may
on the Ship under the terms of a non- of his P&I cover for any claim arising as not be able to recover any subsequent
negotiable bill of lading, waybill or other a consequence of the same by reason delay as damages or demurrage.
non-negotiable document, and has of the operation of the exclusion in Rule
been properly delivered as required by 34.1.b(i) described above. (ii) The shipowners position under a
that document, notwithstanding that the time charter. Generally, hire is payable
Member may be liable under the terms In view of the serious consequences if he continuously during the period of the
of a negotiable bill of lading issued by delivers the goods without production of time charter, unless the charterers are
or on behalf of a party other than the the bill of lading, what is the shipowner able to either bring themselves within
Member providing for carriage in part to do in practice? the off-hire clause or show that the delay
upon the Ship and in part upon another resulted from a breach of contract on
ship. Options available to the shipowner the part of the shipowner which has
when the bill is missing at the deprived them of the use of the vessel
The conflict between theory and discharge port entitling them to claim their damages
practice (a) The shipowner can wait for the from the hire. In fact, it has been held
The theory is that the rule devised by bill of lading to arrive by the Court of Appeal that a refusal
the courts should enable the owner to This is the safest option for the on the part of a shipowner to deliver
overcome the problem of the trading shipowner. However, this is not usually cargo without presentation of bills of
of the bill of lading without undue risk practicable or economically viable. The lading was not a breach of contract and
to him. In reality, however, the position shipowner will not know how long the that hire was therefore payable in full
is much more complicated due to ship may have to wait and it will be during the period of delay6. Whether the
the fact that the vessel often arrives contrary to his business interests to have shipowner is obliged to deliver against
at the discharge port before the bill the ship tied up in this way, particularly if an indemnity if the bill of lading is not
of lading. This is particularly the case he is unable to claim that delay from the available is discussed in more detail
where the voyage takes only a few consignee or the charterer. The effect in section (c) below, but the general
days. The consignee purporting to have of delay on the shipowner is examined position is that the shipowner is not
entitlement to the goods then requests below, under a voyage charter first and obliged to deliver the cargo against an
delivery of the goods even though he secondly a time charter. offer of a letter of indemnity. It should be
is unable to present the relevant bill of remembered that while the practice of
lading. The shipowner is often placed (i) The shipowners position under a delivering cargoes against an indemnity
under considerable commercial pressure voyage charterparty. In the absence of a has been developed (mainly by
to deliver the cargo, even though the clear provision in the charterparty, under charterers/traders), this does not mean
consequences of misdelivering the a voyage charterparty the shipowner is that the Master is obliged to follow this
cargo, as described below, are very under no obligation to deliver the goods practice6.
serious. to a party who is unable to produce a
bill of lading. However, if the shipowner If, however, the delay in waiting for the
The consequences to shipowners decides to wait for the bill of lading, who bill appears to be so unreasonable,
of delivering cargo without bears the risk of the time lost to him in especially in circumstances where
production of the bill of lading consequence? There is little authority it appears that the bill of lading has
Under the terms of the contract on the subject, but it is suggested been lost rather than simply that the
contained in or evidenced by the bill that laytime or demurrage will run vessel arrives before it does, it may be
of lading, the shipowner is obliged continuously unless there is unreasonable for hire to continue to
to deliver to the person entitled to default on the shipowners part which be paid and in such circumstances, the
possession thereunder, namely, the causes delay or unless the running of shipowner should apply to the court
shipper himself or the named consignee, laytime or demurrage is prevented for directions as to discharge and/or
or, if the bill of lading is made to order, by a clearly worded exception clause. delivery.
to the endorsee holder of the bill. By This interpretation follows, by analogy,

4 See the BORAL GAS [1988] 1 LLR 342.

Gard AS, March 2011


60
(b) Delivery against one original However, it should be remembered where he has positively agreed to
bill of lading retained on board that a Member who agrees to follow deliver the goods against the same in
When it is anticipated that the vessel this procedure will be in danger of the contract with charterers. This must
may arrive before the bill of lading, the prejudicing his P&I cover. It cannot be be a positive obligation however, rather
practice has evolved whereby the bill of stressed too highly that the practice than simply a right to an indemnity. The
lading is issued in a set of three originals, should therefore be resisted. distinction between the two is illustrated
and the shipowner agrees that one of in the following sample clauses:
the set is to be retained on board, for (c) Delivery against an indemnity charterers hereby indemnify owners
delivery to the consignee or notify party (i) Is the shipowner compelled to accept [for]complying with their orders
on arrival at the discharge port. The an indemnity? The primary point to note (including delivery of cargo without
Master then delivers the document to is that the shipowner is not, without presentation of bills) gives the
that party and this is re-presented to very clear wording in the contract, right to an indemnity6. Should bills
him and delivery made against it. This compelled to deliver cargo against an not arriveowners agree to release
option has been particularly prevalent in indemnity for non production of the the entire cargo without presentation
the oil trade. However, notwithstanding original negotiable bill of lading. Whilst of original bills against delivery by
the common practice, it is strongly certain trades (the oil trade in particular) charterers ofindemnity gives rise
discouraged by the International Group have developed the practice of to an obligation on the shipowner to
of P&I Clubs, as the protection afforded delivering without original bills against deliver the cargo in exchange for an
to a shipowner by the common law an indemnity this does not change the indemnity7.
principle that he may safely deliver to general position as set out above.
a bill of lading holder where he has no Even where there is positive agreement
adverse notice of claims is seriously In the HOUDA6 the Court of Appeal by the shipowner to accept an indemnity
prejudiced where two of the three had to consider whether a time charter a word of caution should be sounded:
original negotiable bills in the set are was in any way different as regards if it is clear to the shipowner that the
in circulation. This is because there is a delivery against an indemnity than a party to whom the charterers request
clear risk that the other originals may voyage charter or bill of lading. The the cargo be delivered is not the holder
have been traded during the course of charterers argued that the presence of of the bill/the party entitled to delivery
the voyage and the bill of lading which an indemnity in a time charter (whether of the cargo, the shipowner is still not
remains on board does not therefore express or implied) together with their compelled to deliver the cargo and
reflect the true ownership of the cargo. ability and indeed, entitlement, to give accept the indemnity. This appears to
Moreover, the fact that the Master has employment instructions, meant that a be on the basis that the agreement
retained the bill of lading against which shipowner was compelled to follow their may be void for illegality at the time
he will be making delivery must give orders as to delivery without production performance is required on the basis of
rise to an inference that he is aware that of the negotiable bills. The Court of a potential fraud8.
the holder of that bill is not necessarily Appeal rejected this as a matter of
the true owner of the cargo. Having general principle, affirming what had (iii) The position if an indemnity is
notice of possible competing claims, the been generally understood to be the accepted by the shipowner.
shipowner or Master is then obliged to case prior to the first instance decision Notwithstanding the dangers inherent
make enquiries to assure himself that the of Mr Justice Phillips, namely that the to owners in agreeing to deliver
consignee does, in fact, have the right to mere combination of the charterers right cargo without production of the bill of
take delivery. to give orders as to employment and lading against an indemnity, the fact
the shipowners right to an indemnity remains that it is a widespread practice.
These difficulties have led to guidelines did not, of itself, allow charterers to What then can the shipowner do to
being issued by the International Group compel a shipowner to follow orders minimise his risk? The practicalities of
of P&I Clubs to assist shipowners when in this regard. This is on the basis that the procedure and the Associations
they are asked to follow this practice. whilst the shipowner may have a right guidelines were discussed in detail in
Reference is made to Gard Circular to an indemnity, he is not compelled to Gard News No. 112. Therefore, we do
No. 2/90. This advises Members to take it up. This is also on the basis that not propose in this article to deal with
resist requests to carry one of a set in common law, charterers, having given the finer points of the indemnity to be
of original bills of lading on board. If, orders to issue a negotiable bill thereby given, other than to stress the following
notwithstanding this recommendation, giving rise to an obligation on the points (all of which are discussed in
Members are under pressure to do so, shipowner to deliver on production of detail in Gard News 112):
the Association recommends that the that bill, and a liability on the shipowner 1. an indemnity is only as good as
following wording be endorsed on all of to a third party, could not legitimately/ the financial strength of the person
the original bills of lading: One original lawfully change that order. giving the indemnity to meet his
bill of lading retained on board against obligations under it;
which delivery of cargo may properly (ii) When is a shipowner compelled to 2. the indemnity should cover the
be made on instructions received from deliver the cargo against an indemnity? full potential liability which would
shippers/charterers. The clearest case where the shipowner include not only the value of the
will be compelled to accept an cargo but also cover interest and
It is believed that this endorsement indemnity is where the charterers obtain costs and any other damages as a
will give notice to any party purchasing an order of a competent court to this result;
the cargo against an incomplete set effect, which will usually be in cases 3. the indemnity must be drafted so as
of bills of lading that delivery may be where the bills have been lost. not to become time barred;
made in exchange for one original bill of 4. the indemnity should include a
lading retained on board and, as such, The shipowner may also be obliged to relevant law and jurisdiction clause
should reduce the risks of the practice. deliver the goods against an indemnity in case the need arises to enforce it.

5 See Carlberg v. Wemyss [1950] S.C. 616 wich confirms that a shipowner may be precluded from claiming demurrage/damages for delay when there
are other means available to him to protect his position and discharge the cargo. See also Section 493 of the English Merchant Shipping Act 1894 wich
gives a shipowner a statutory right to discharge and warehouse the cargo into the United Kingdom after the expiration of 72 hours.
6 See the HOUDA [1994] 2 LLR 551.

Gard AS, March 2011


61
In issue No. 112 of Gard News it was It is generally considered that the a new scheme called Bolero has
also pointed out that although the potential problems identified above been developed. This is intended to
practice was to be resisted, if a letter of are reduced significantly when the bill be a paperless scheme whereby the
indemnity was to be given which was of lading is made non-negotiable. The information usually recorded on a bill of
legally binding and which afforded the Associations Rule 34.1.b(i) does not lading is transmitted to a central registry
shipowner some protection, it should exclude cover for claims arising from by electronic transmission and notice is
be in the wording recommended by delivery of cargo without production of given to that registry whenever the bill
the International Group of P&I Clubs. a non-negotiable bill of lading, provided of lading is negotiated. This information
This wording joins both the consignee delivery has been made to the person is acknowledged and the new electronic
making the request and a bank in the entitled to take delivery. record is then held for the benefit of the
undertaking. The joining of a bank in buyer. At the moment, full details of the
the undertaking is of great significance The obvious question then is, what is scheme have not been made generally
as the security is only as sound as the to be regarded as a non-negotiable bill available, although it is believed that
solvency of the party granting it. It is of lading? This is not easy to answer as a trial scheme will be coming on line
therefore vital to ensure that a first different jurisdictions apply different shortly.
class bank should make a commitment definitions. Generally, however, this can
in common with the party making the be described as any bill of lading which Delivery in ports where delivery is
request for delivery. does not constitute a document of title, to the customs authority
possession of which can be regarded as Finally, we must comment on the
An additional note of warning is also equivalent to possession of the goods. situation in certain jurisdictions where
given in that, under English law, an according to the local law the carrier
indemnity which is given in perpetration It is generally considered that a waybill is required to deliver the cargo not to
of a fraud or an illegal or immoral act and a straight bill of lading, i.e., one the bill of lading holder, but to a public
will be void and unenforceable for being which names the consignee and obliges authority, usually the customs authority
contrary to public policy8. An example the owner to deliver to that person, or perhaps a bonded warehouse.
of this includes an indemnity given are also non-negotiable bills of lading. Variations on this cargo delivery system
to the shipowner in exchange for his However, it should be noted that in exist in many jurisdictions, including
agreement to issue clean bills of lading some jurisdictions such documents are Argentina, Brazil and Chile. Thus, in
notwithstanding his knowledge that the regarded in the same way as negotiable those jurisdictions, although the cargo
cargo represented by the bills of lading bills of lading. Moreover, under English is to be carried under a bill of lading,
was, in fact, damaged. Although the law at least, even though a consignee it is not necessary or even possible for
letter of indemnity given for delivering has been named in the bill of lading, the carrier to deliver against that bill
cargo without production of the original this may not necessarily be the shippers of lading. Although the position is not
bills of lading is in a different category final instructions to the shipowner. In always clear, most such jurisdictions
and is unlikely to be regarded as an fact, the shipper is entitled to alter provide that delivery of the goods
illegal act or contrary to public policy, his instructions to the shipowner with takes place by handing them over
there may still be consequences for the regard to delivery before the goods are to an authority to whom, by law, the
owner if he knowingly misdelivers the delivered or decide instead to retain the cargo has to be delivered. We should
cargo in exchange for an indemnity. The bill of lading because, for example, he advise, however, that as the cargo is
indemnity will not be enforceable, even has not been paid9. However, once the being delivered without production
if it does have the rare distinction of bill of lading has been received by the of the bill of lading, the matter will fall
being countersigned by a bank. named consignee, the shipper may not within the exclusion of cover under
alter his instructions as his control over Rule 34.1.b(i). Accordingly, the Member
The above summarises the options the possession of the goods is gone. delivering cargo in those jurisdictions
available to a shipowner when faced should always seek the advice of the
with the problem of a consignee It should be stressed that where Association or its local correspondents in
demanding delivery without production straight bills of lading or sea waybills order to avoid misdelivery claims.
of the relevant bills of lading. While are regarded as negotiable documents
certain safeguards can be incorporated liability for misdelivery claims will be Conclusion
into the various options to maximise excluded under the Associations Rule It is hoped the above provides some
the protection for shipowners, none 34.1.b(i). It can be seen therefore, that useful information on the problems of
of these can be made failsafe. This the best protection for the shipowner in delivering cargo without production of
is of course discouraging in the light these circumstances is for the delivery to the original bill of lading. It is further
of modern shipping practices and take place only on presentation of the hoped that it will enable Members to
improved communications. It may be bill of lading. make an informed decision as to their
better therefore, rather than to react to options and what they can/cannot be
the situation at the discharge port when In view of the above, Members are obliged to do when presented with a
the matter is already a problem for the advised to always act with extreme demand to deliver goods without the
shipowner, to consider carefully whether caution and to seek the Clubs/its local original bill of lading being presented.
there is any need at all for a negotiable correspondents advice if they are asked However, as no two cases are the
bill of lading to be issued. If it is not to deliver the goods without production same, at the end of the day the best
necessary, shipowners should consider of the bill of lading. (and shortest) advice is, of course, to
whether other carriage documents contact the Association whenever such a
(such as these described below) could Electronic Data Interchange request is made (whether at the time of
be better utilised to avoid the potential Reference is made to early schemes negotiating the contract of carriage or
problem identified above. Documents such as the Seadocs project which, later, at the discharge port).
other than negotiable bills of lading (a) for various reasons, failed to get
Use of a non negotiable bill of lading off the ground. Recently, however,

7 See the DELFINI [1990] 2 LLR 252


8 See Brown Jenkinson v. Percy Dalton [1957] 2 QB 621.
9 See Mitchel v. Ede [1840] 11 Ad. & El. 888

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62

Cargo shipped on deck


Gard News 160,
December 2000/February 2001

- The imperfect bill of


lading

Most readers will probably find that the particular, the judge reasoned that the Visby Rules was excluded by virtue of
clear and unambiguous printed bill of presence of the word negligence in the fact that the cargo was stated to
lading clause quoted below leaves little two other clauses of the bill of lading be stowed on deck and was so carried,
room for argument insofar as liability was of significance. the decision effectively meant that
for loss of deck cargo is concerned. The the carrier was without any further
clause reads as follows: Although the litigation involved several contractual defences in this particular
issues the main issue before the judge case.
Goods stowed on deck shall be at was whether the exemption language
all times and in every respect at the risk embodied in the printed deck stowage The lesson to be learned seems to be
of the Shipper/Consignee. The Carrier clause and the typed clause on the that a careful review of
shall in no circumstances whatsoever be face of the bill of lading operated to the relevant bill of lading clauses
under any liability for loss of or damage release the carrier from liability for the is always warranted when carrying
to deck cargo, howsoever the same be negligent act of the Master. goods on deck, even if the bill of
caused lading appears to have been properly
The first instance judge reasoned that claused to reflect that the carrier is
Additionally, in this particular case while the language of the deck stowage not responsible for loss of or damage
the face of the bill of lading had been clause(s) was obviously wide enough to the goods whatsoever and
claused on deck at shippers risk. to cover liability for negligence, it howsoever caused. It is possible
remained that the word negligence that the judge might have come to a
Somewhat surprisingly, the Federal was left out. Furthermore, he went on different result if the printed deck cargo
Court of Appeal in Canada recently to say that this omission, insignificant clause had read howsoever caused,
dismissed an appeal filed by a carrier, as it may seem in the face of words including negligence. or something
thus upholding the earlier decision which were otherwise broad enough similar.
of the lower court which itself was to exempt a carrier from liability arising
unfavourable to the carrier. Basically, from negligence, becomes significant
the court found that the carrier was where the word negligence is twice
liable for the negligence of the Master referred to as a relevant head of liability
because the clause quoted above did elsewhere in the contract (once in the
not contain the word negligence. Both to blame collision clause and
once elsewhere).
It is quite interesting to note how the
judge construed the clause so as to find It ought to be added that since the
liability on the carrier in this case. In application of the Hague or Hague-

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63

Who decides the form of


Gard News 156, December 1999/
February 2000

the bill of lading?


Owners or charterers?
By Richard Williams, Ince & Co., London

Shipowners and disponent owners often loading port and in such circumstances discharging crane. The consignees
believe that when a ship is chartered an owner may have no choice but to brought a claim against the shipowner
(particularly if it is time chartered) they accept the bill and rely on his right of and the latter sought an indemnity from
need not concern themselves about the indemnity. In all other circumstances the charterers. The charter contained
form of the bill of lading since the owners the law should be able to decide who an exception clause which would, if
are entitled to seek an indemnity from controls the form of bill of lading but, as applicable, give the owners a defence
the charterers if the terms of the bill of we shall see later, unfortunately it does to the claim brought under the bill.
lading expose the owners to greater not. However, it was feared that since the
liability than that which they would face blank on the face of the bill had not
if the claim were brought against them Two problems usually arise in relation to been filled in, the charter was not
under the charter. However, it must not be this issue: identified and the owners would not be
assumed that owners are always entitled (1) When, if an owner signs a bill of able to rely in the Greek proceedings
to such an indemnity and, in any event, the lading presented by the charterer, is on the exception clause to defeat the
sufficiency of the indemnity is only as good he entitled to claim an indemnity from claim brought by the consignees.
as the creditworthiness of the charterers in the charterer if he [the owner] incurs a
question. The reality of the situation is that liability under the bill? This is the easier The judge held that the question of
once cargo is shipped, the owners assume issue. whether the owners were entitled
responsibility for the carriage and well being (2) The more difficult issue arises if a to claim an indemnity from the
of the cargo and incur liability directly to the shipowner prefers not to have to rely on charterers depended upon whether
cargo owners. The owners, therefore, have a any such indemnity. When, therefore, is the bill of lading which was presented
real interest in the form of the bill of lading a Master entitled to refuse to sign a bill for signature by the charterer was a
which may be issued since this will establish of lading presented by the charterer? contractual one (i.e., one which the
the terms upon which they agree to carry charterers were entitled to present for
the cargo and will establish whether they are Both situations are considered below. signature pursuant to the charter). If the
liable to the goods owner or have a defence bill of lading was a contractual bill then
for any claim. INDEMNITY FROM THE there was no cause for complaint and
CHARTERERS no ground for claiming damages for
However, the form of the bill is relevant In the recent decision of the Ikariada,1 breach of contract or an indemnity. In
not only to the shipowners but also to Mr Justice Cresswell considered determining whether or not the bill of
the cargo owners who may require a the very common situation in which lading was a contractual one the judge
bill in a particular form for the purposes charterers present to the Master for laid down the following rules:
of their purchase/sale contract or the signature a bill of lading which purports (i) The question of whether or not the
terms of a letter of credit. The failure to incorporate the terms of a charter bill was a contractual one should be
to obtain release of such a bill may which is to be identified by filling in the determined in accordance with the
often therefore mean that the shipper relevant date in a blank on the face of law which governed the charterparty
is not able to obtain payment for his the bill, but which is, in fact, left empty. pursuant to which it was issued.2 The
goods. Therefore, the shipment of The charterparty in question provided proper law of the charter in question
goods can often lead to a commercial by Clause 9 that: Captain to sign was English and it was not, therefore,
tug of war which is acrimonious and bills of lading at such rate of freight relevant to consider the position under
time consuming. Whoever is in the as presented without prejudice to this Greek law which might govern the bill
wrong will probably have to pay for the charterparty . of lading claim in Greece.
delay to the ship and perhaps more (ii) In determining whether or not the
importantly, delays to the movement of The bill of lading which was presented bill was a proper one, it was necessary
the cargo documents under letters of was on the Congenbill Edition 1978 to distinguish between charters which
credit. Such claims can be expensive. form and provided that: All terms and require the Master to sign bills of lading
conditions, liberties and exceptions of as presented and charters which
The traditional rule that a carrier is the charterparty, dated as overleaf, are provide that the Master shall sign bills
entitled to give, and the cargo owner herewith incorporated. of lading in a specified form.
obliged to accept, the carriers usual (iii) Where the charter provides that
form of bill of lading has long since However, the blank space on the front the Master shall, upon request, sign
disappeared (except, perhaps, in of the bill of lading, which should have bills of lading in a specified form (e.g.,
relation to liner trading), since the contained the date of the charterparty, Clause 20 of the Asbatankvoy form),
charter under which the vessel is was not filled in. a bill of lading will not be in that form
operating will usually now establish who if there are blanks on the form itself in
has the right to control the form of the Whilst coming alongside the which the charter date, etc., should be
bill which is to be used. There will, of consignees discharging facility in inserted but the relevant details are not
course, be occasions when only one Greece the vessel was negligently in fact inserted.
form of bill is available at a particular navigated and caused damage to a

1
(1999) AER (Com Cas) 257.

Gard AS, March 2011


64
(iv) Where the charter does not provide general, the system works well to with the charter but nevertheless
that the bills are to be presented in a create certainty in the law but if courts contains terms which impose on the
particular form but requires the Master (particularly if they are higher courts) carrier greater liability than he has
to sign bills of lading as presented disagree with each other, then certainty agreed to bear under the charter. There
the mere fact that the blanks on the is replaced by confusion. appear to be two strands of English
face of the bill are not filled in does not authority moving in two completely
itself render the bill an uncontractual It appears to be settled that where the different directions in relation to this
one since, under English law, the effect charter specifies exactly which form of issue.
is the same as if there were a reference bill is to be used (e.g., Clause 20 of the
to the charterparty governing the Asbatankvoy form) any attempt by the On the face of it, there is one strand of
carriage.3 charterer to present a bill in a different authority applicable to voyage charters
(v) A bill might, nevertheless, be form will amount to an illegitimate and one applicable to time charterers.
uncontractual if it included terms instruction which the owner can reject.4 This may be explainable by the fact that
which were either extraordinary there is recurring judicial recognition
terms, or terms which were manifestly However, the position is not clear that the purpose of time charters is
inconsistent with the charter or terms where, as is more often the case, the to enable the charterer to exploit the
which imposed more onerous terms on charter does not specify a particular commercial operation of the vessel for
the owners than those accepted and form but states that the Master is to his own purposes. Perhaps, the clearest
agreed to be borne by him under the sign a bill of lading as presented. example of this is the dictum of Lord
charter. These words underline the power of the Wilberforce, speaking in the House of
charterer to decide what form of bill is Lords:
Since (a) the charter did not require a appropriate for their trade. However, It is important in this connection to
specific form of bill and since (b) the bill the right of the charterer to determine have in mind that the present charters
of lading effectively incorporated the the form of the bill is nevertheless are time charters, the nature and
terms of the charter and (c) did not have subject to a number of restrictions. The purpose of which is to enable the
any terms of the type described in para difficulty which arises is because the charterers to use the bills of lading
(v) above, the judge held that, from the question of which restrictions apply has during the period of the charters
perspective of English law, the bill of been developed somewhat haphazardly for trading in whatever manner they
lading presented by the charterers was by the English courts over the years. think fit. The issue of bills of lading in
a contractual one. It further followed a particular form may be vital for the
that owners would not be entitled to It appears to be established that charterers trade, and indeed in relation
claim an indemnity from charterers the Master is not obliged to sign to this trade, which involves c.i.f. or
if they were found liable to the bills of lading as presented if such c. & f. contracts, the issue of freight
consignees in the Greek proceedings. bills contain terms which are either pre-paid bills of lading is essential if the
(a) extraordinary terms or (b) terms trade is to be maintained. Furthermore,
This was the main point in issue in which are manifestly inconsistent with Clause 9 as is usual in time charters,
the Ikariada and the judgment is, the charter.5 An example of a bill of contains an indemnity clause against
therefore, unsurprising, albeit welcome lading term which would be manifestly all consequences or liabilities arising
in clarifying the differences between inconsistent with the charter would be from the master signing bills of lading.
a charter providing expressly for a one which provided for the Hamburg This underlines the power of the
particular type of bill of lading and a Rules when the charter provided that charterers, in the course of exploiting
charter providing for the signature of any bill of lading should be subject the vessel, to decide what bills of lading
bills as presented. to the Hague or Hague Visby Rules.6 are appropriate for their trade and to
Another example would be a bill of instruct the masters to issue such bills,
REFUSAL TO SIGN A BILL OF lading obliging the owners to carry the owners being protected by the
LADING IN A PARTICULAR FORM goods to a geographical area excluded indemnity clause.8
In the course of giving judgment the under the charter.7
judge touched upon the more difficult However, it has also been judicially
problem of whether and when an owner It is more difficult to give an example recognised that, in many instances,
can refuse to instruct the Master to sign of an extraordinary term. Whilst the there is no difference between the
a bill of lading in a particular form. The courts have repeatedly stated that the requirements of a voyage charter and a
impression given in the judgment is Master would be entitled to refuse to time charter and, indeed, many of the
that the relevant issues are settled by sign a bill including such terms they cases refer to time charter and voyage
authority. However, such impression is have not been quick to give examples. charter decisions interchangeably as
misleading. The state of the authorities A possible example might be a bill of authorities for various principles of law.
is far from satisfactory; they are, in fact, lading which excluded the shippers The distinction between voyage and
in conflict. English law is based upon liability for the shipment of dangerous time charters may therefore be more
the concept of precedent, that is to say goods. apparent than real.
a system where courts are bound by
the decision of an earlier court on the The law is not, however, clear when the The voyage charter line of authority
same point and a lower court is bound bill does not contain terms which are appears to say that, notwithstanding the
by the decision of a higher court. In extraordinary or manifestly inconsistent words as presented, a charterer is not

2
Paros (1987)2 Lloyds Rep. at 273.
3
SLS Everest (1981)2 Lloyds Rep. 389.
4
Garbis (1982)2 Lloyds Rep. 283.
5
Kruger v. Moel Tryvan (1907) AC 272; Berkshire (1975)1 Lloyds Rep. 185.
6
By way of contrast, there would be no inconsistency where the charter provided that all claims under the charter were to be subject to English
arbitration if a bill of lading issued pursuant to the charter provided that Norwegian jurisdiction would apply to a claim under the bill. See Vikfrost
(1980)1 Lloyds Rep. 560.
7
Halcyon v. Continental (1943)75 Lloyds Rep. 80.

Gard AS, March 2011


65
entitled to present for signature a bill not affect the contract contained in the refuse to sign a bill of lading which
of lading which imposes on the owners charterparty. If a shipowner puts up a is (a) not in a form expressly required
greater liability than those imposed by ship as a general ship, he may insist on by the charter, or which (b) does not
the charter itself.9 However, the time a bill of lading in any terms he pleases, contain extraordinary terms or (c) does
charter line of authority has, during the or he may refuse to take the goods. not contain terms which are manifestly
same period of time, repeatedly stated Here the shipowner deprives himself inconsistent with the charter, there
that the charterers are entitled in such of that right and agrees to sign bills of is no guarantee that the Master is
circumstances to present a bill which lading as presented; but that is not to entitled to refuse to sign a bill of lading
imposes on the owners greater liability affect the charterparty. Therefore, the which merely imposes on his owners
than that imposed on them by the charter captain was bound to sign the bill of greater liability than that imposed
and that the Master is obliged to sign lading which he did. on them by the charter. If the owners
such a bill10 - the owners remedy being are not prepared to run the risk of
to claim an indemnity from the charterers This dictum was subsequently approved refusing to sign a bill of lading of the
should they be found liable for claims by the House of Lords in Turner v. Haji latter type then their remedy is to
made under the bill in circumstances in Goolam13 and in the Nanfri.13 seek an indemnity from charterers if
which they would not be liable if the claim they do incur liability under the bill
had been made under the charter.11 However, and somewhat confusingly, in circumstances in which they would
the same higher courts have, not be liable if the claim had been
The words as presented are often throughout the same period of brought against them under the charter.
accompanied by the additional words time, consistently repeated in the Owners, therefore, need to be sure that
without prejudice to the terms of this voyage charter line of authority that their charterers either have sufficient
charter. The time charter line of the purpose of the words without charterers liability insurance or failing
authority has repeatedly restated that prejudice to the charter was to that, sufficient assets, to meet claims.
this makes no difference to the Masters emphasise that the charterers were
obligation to sign bills of lading as prevented from presenting for signature
presented since the additional words bills of lading in terms which differed
merely emphasise that the releasing of from those of the charter.14 Indeed, this
a bill of lading in different terms does view seems to have been restated in
not affect the rights and obligations of recent years by Lord Justice Mustill in
the owner and charterer inter se under the Nogar Marin15 where he said:
the charter. This was emphasised by the
House of Lords as long ago as 1894 in Where the master is expressly required
Hanson v. Harrold,12 when Lord Esher to sign the bills as presented and where
M R said: the contract stipulates that the act is
The meaning of the words without to be without prejudice to the charter,
prejudice to the charterparty has been the charterers right to issue bills to suit
settled by decisions which cannot be his own convenience is constrained
questioned. The meaning as settled by the need to make the terms of the
by the cases of Shand v. Sanderson new contract which he thus imposes on
(1) and Gledstones v. Allen (2) is that it the shipowner more burdensome than
is a term of the contract between the those which the shipowner originally
charterers and the shipowners that, contracted to assume in exchange for
notwithstanding any engagements the freight.
made by the bills of lading, that
contract shall remain unaltered. This dictum has now been adopted by
Therefore, in this case the captain Cresswell J in the Ikariada,16 another
was bound to sign the bill of lading voyage charter case, albeit at first
presented to him; but his doing so instance level.
was to be without prejudice to the
charterparty. These words do not limit CONCLUSION
the obligation under the charterparty The lesson to be drawn from the
to sign the bills of lading presented to currently confused state of the
him; but when he has done so it does authorities is that whilst owners can

8
Nanfri (1979)1 Lloyds Rep. at 206.
9
Kruger v. Moel Tryvan (1907) AC 272; Dawson v. Alder (1932)1 KB 433; Anwar Al Sabar (1980)2 Lloyds Rep. 261; and Nogar Marin (1988)1 Lloyds Rep.
412.
10
Hanson v. Harrold (1894)1 QB 612; Turner v. Haji Goolam (1904) AC 826; Nanfri (1979)1 Lloyds Rep. 201.
11
Island Archon (1994)2 Lloyds Rep. 227.
12
(1894)1 QB at 619.
13
Hanson v. Harrold (1894)1 QB 612; Turner v. Haji Goolam (1904) AC 826; Nanfri (1979)1 Lloyds Rep. 201.
14
Kruger v. Moel Tryvan (1907) AC 272; Dawson v. Alder (1932)1 KB 433; Anwar Al Sabar (1980)2 Lloyds Rep. 261; and Nogar Marin (1988)1 Lloyds Rep.
412.
15
(1988)1 Lloyds Rep. at 421.
16
(1999) AER (Com.Cas) 257.

Gard AS, March 2011


66

Forum selection clauses


Gard News 143,
September 1996

in bills of lading

INTRODUCTION An exclusive forum selection clause is Arbitration clauses are not very
The Norwegian Maritime Act of 1994 a clause by which the contract parties common in bills of lading, but are
(the 1994 Act) which entered into have agreed that the selected forum sometimes incorporated by reference
force on 1st October 1994 has been shall have exclusive authority to resolve when bills are issued pursuant to
described as a hybrid of Hague-Visby contract disputes. The intention is charterparties. In the 1994 Act,
Rules and Hamburg Rules legislation, clearly to prohibit interference by other arbitration and jurisdiction clauses
insofar as concerns its rules on the courts. Whether a court or tribunal are treated in the same way, as the
carriage of goods by sea under bills of (other than the contractually selected legislators wished to prevent a shift
lading and similar documents of title.1 one) which is seized with the dispute from the latter to the former.
will in fact give effect to the exclusive
The reason for the label hybrid is forum selection clause, depends Articles 310 and 311 are dealt with in
that, although the Hague-Visby Rules largely on the domestic law concerning more detail below.
have not been denounced by Norway, jurisdiction. However, it is fair to say that
the legislators have, as regards most in most jurisdictions an exclusive forum Scope of compulsory application
aspects which fall outside the scope selection clause is more likely to be trade area
of those Rules, purposely enacted upheld than a non-exclusive clause. By virtue of the 1994 Act, Articles 252
provisions which closely follow the and 254 the provisions contained in
Hamburg Rules model. When the clause is upheld, cargo Articles 310 and 311 apply compulsorily
claimants may have to litigate their to all contracts of carriage of goods
It is beyond the scope of this article to cargo claims before a forum which is by sea evidenced by a bill of lading or
elaborate on all the changes introduced quite remote from the area where the similar document of title2;
by the 1994 Act. Rather, it is intended actual carriage of cargo was performed, (a) in domestic Norwegian trade
to focus on the new rules governing or their domicile or principal place of (b) in trade between Norway, Denmark,
jurisdiction and arbitration clauses business. This is particularly so in the Finland and Sweden (the Nordic
(forum selection clauses) in bills of liner trade. Such remoteness may in states)
lading and similar transport documents. practice make it difficult to pursue the (c) in other foreign trade to or from any
claim. In addition to increased costs, of the Nordic states
FORUM SELECTION CLAUSES uncertainty may arise as to whether the
A forum selection clause in a bill of forum will apply the law of the contract In other words, when determining its
lading is a clause by which the parties on the dispute, or domestic law which own jurisdiction to hear a cargo dispute
to the contract of carriage agree that may differ substantially from the law of which has arisen under a bill of lading, a
disputes arising under the contract the contract. Norwegian court is bound to apply the
shall be decided by a particular court provisions contained in Articles 310 and
or arbitration tribunal. In standard NORWEGIAN MARITIME ACT 1994 311 with respect to cargo shipments
form bills of lading this will usually be a ON FORUM SELECTION CLAUSES to or from any of the Nordic states.
court or tribunal located at the carriers Purpose Furthermore, the court will set aside
principal place of business. When drafting the the 1994 Act the the contract forum selection clause to
legislators decided to design provisions the extent that it is in conflict with those
A forum selection clause must be offering a higher level of protection provisions. However, the court does not
distinguished from a choice of law to cargo claimants in respect of forum have authority to set aside such a clause
clause. The latter is a clause by which selection clauses than was offered in if the contract of carriage is performed
the contract parties agree which law or the previous act. entirely outside the Nordic area.
international convention shall govern
disputes arising under the contract, The provisions governing the validity Scope of compulsory application
e.g. a requirement that the Hague- of forum selection clauses in contracts transport documents
Visby Rules as enacted in the country concerning carriage of goods by sea According to Article 253 of the 1994
of shipment shall be applied when are stated in Articles 310 (jurisdiction Act, the provisions concerning carriage
resolving cargo disputes. A choice of clauses) and 311 (arbitration clauses) of goods by sea, including Articles 310
law clause may in certain circumstances of the 1994 Act. These Articles follow and 311 on forum selection, do not
bind the nominated court or tribunal closely Articles 21 and 22 of the apply compulsorily to charterparties.
to apply foreign law to the dispute. It Hamburg Rules. The main purpose has
should be noted that, frequently, bills of been to secure the right of the cargo However, the provisions apply
lading contain a combined forum and owner to pursue his claim, at his own compulsorily to a bill of lading issued
choice of law clause. option, before a forum in a state closely pursuant to a charterparty when the
connected to the area of performance bill evidences the contract of carriage
of the contract. as between its holder and the carrier.
Thus, a charterparty forum selection

1 See Gard News 135.


2 Reference is made to Articles 252 and 254 in Article 310 fifth paragraph and 311 third paragraph.

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67
clause incorporated by reference into a places of performance of the contract. action before the same forum on his
bill of lading which has been properly For example, for any cargo loaded or own initiative and plead not liable in
endorsed to a third party, will only discharged at a Norwegian port, the respect of an incident which he expects
prevail if it has been expressly stated plaintiff will be entitled to institute will give rise to claims against him at a
in the bill that the incorporation shall his action at that port, whatever the later stage?
have binding effect on such third party jurisdiction clause in the bill of lading.
endorsee3. Moreover, under a multimodal contract The plain words of the provision do
of carriage which includes a stage of not appear to prohibit such action
Validity of forum selection clauses ocean carriage, the plaintiff will be by the carrier. In fact, the draftsmen
under Norwegian law entitled to institute his action in Norway have actually emphasised the fact that
The main rule4 is that any clause, against the multimodal transport the option to commence suit may
covenant or agreement in a bill of operator, if the place of delivery to be exercised by the plaintiff whether
lading which limits the right of the or from that operator is in Norway, this be the cargo owner or the carrier.
plaintiff to institute a court action in notwithstanding the fact that the cargo Whether such negative action would
respect of a dispute arising out of the may have been loaded or discharged in succeed would of course depend on
bill of lading contract, will be null and another state. the attitude of the court or tribunal in
void to the extent that it limits the the contractually agreed forum.
right of the plaintiff to institute such From sub-paragraphs (a) and (b) it is
action, at his own option, at one of the clear that defendant carriers having Forum selection clauses and arrest
following places: their principal place of business in jurisdiction
(a) the principal place of business or, Norway, or an agency through which A ship and/or its freight may be
in the absence thereof, the habitual the subject contract of carriage has arrested in Norway as security for a
residence of the defendant; been made, may now be sued in maritime claim, which includes, inter
(b) the place where the contract was Norway whatever the forum selection alia, a claim for loss of or damage to
made, provided that the defendant clause inserted in their standard bill of cargo. Such arrest action gives the
has there a place of business or agency lading. plaintiff a right to institute future legal
through which the contract was made; proceedings in respect of the cargo
(c) the place of delivery of the cargo Norwegian law does not interfere with claim at the place of arrest8. The fact
into custody of the carrier, according to the right of the contracting parties that arrest has been prevented or lifted
the contract of carriage; or to agree that cargo disputes should due to the provision of security does
(d) the agreed or actual place of be resolved by arbitration6. However, not interfere with the forum option
delivery of the cargo from the custody the statutory condition is that such established by the arrest action.
of the carrier, according to the contract agreements must not put constraints
of carriage. on the forum selection options of the In this context the question is whether
plaintiff described above. an exclusive forum selection clause in
If the bill of lading contains a forum the bill of lading will prevail over the
selection clause which is in conflict with Options available to both cargo arrest forum option. As the general
the above provision, the plaintiff will interests and the carrier as principle of privity of contract is
nevertheless be entitled to institute his plaintiffs acknowledged under Norwegian
action at one of the places mentioned Articles 310 and 311 are drafted to offer law, contract forum selection clauses
under (a) (d)5. As will be noted, no forum selection options and thereby are legally valid9 unless prohibited
distinction has been made for exclusive offer protection to plaintiffs. Usually by statute or regulations issued
and non-exclusive forum selection the plaintiff in a cargo dispute will be thereunder. It follows that an arrest
clauses, which means that the wording the cargo owner or his subrogated action instituted to establish security
of the clause is of little relevance underwriter, but not always so. for a cargo claim, and possibly arrest
when determining its validity under jurisdiction, does not by itself override
Norwegian law. The carrier may for instance wish to the forum selection made in the
pursue claims for general average contract.
In other words, Norwegian courts will contribution against various cargo
decide to exercise jurisdiction over owners. It may certainly be of benefit to It follows that; if the cargo carriage
disputes arising under the contract the carrier to institute a collective action under claim was performed between
in circumstances where at least one against all defendant cargo owners at ports outside the Nordic area and
of the criteria in (a) - (d) above is met. the place of loading or discharge rather the relevant bill of lading contained
However, the parties right to agree than be bound to sue each and every a foreign forum selection clause,
that the action shall be brought before one at their respective domiciles. claimants may not obtain Norwegian
a different forum, after the dispute has jurisdiction for cargo claims simply by
arisen, remains unchanged. There is nothing in the provisions arresting the cargo carrying ship when
which prevents the plaintiff from it arrives in a Norwegian port at a later
The forum selection options instituting his action before the stage, nor any sister ship when it arrives
offered to plaintiffs contractually agreed forum if he so in Norway.
Clearly, the provisions offer quite a wide decides7. Obviously, it might lead to
choice to plaintiffs as to where their obscure results if cargo plaintiffs were The effect of the Lugano
action may be instituted. prevented from commencing suit Convention
before the contractually agreed forum The incorporation into Norwegian
Particularly important are sub-sections in circumstances where this would be law of the Lugano Convention on
of Article 310 first section (c) and (d), convenient. The question is, however, jurisdiction and enforcement of
which link the forum for dispute to the whether the carrier may institute an judgments in civil and commercial

3 Article 310 third paragraph.


4 Article 310 first paragraph.
5 Article 310 fourth paragraph.

Gard AS, March 2011


68
matters, leads to an important SUMMARY (8) Arbitration and jurisdiction clauses
modification of the plaintiffs forum (1) Rules concerning the validity of are treated similarly in order to prevent
options to contract of carriage disputes. forum selection clauses in bill of an adaptive shift toward exclusive
lading contracts are to be found in arbitration clauses in bills of lading.
According to the 1994 Act Article 310 the Norwegian Maritime Act of 1994, (9) The Lugano Convention as
sections, the provisions concerning Articles 310 and 311, which entered into incorporated in the Norwegian
forum options only apply to the extent force on 1st October 1994. legislation implies that an exclusive
that they do not conflict with Rules of (2) The forum rules apply compulsorily jurisdiction clause designating a court
the Norwegian Lugano Convention to bills of lading or similar documents in a Lugano Convention state will
legislation. of title, including bills issued pursuant be valid, notwithstanding domestic
to charterparties when endorsed over Norwegian law to the contrary. The
In this context, the crucial provision of to a third party, when the contract of Lugano Convention, however, does not
the Lugano Convention is its Article 17, carriage takes place: apply to arbitration agreements.
which in essence states that exclusive (a) in domestic Norwegian trade
forum selection clauses in contracts are (b) in trade between the Nordic states
legally valid if: (c) in foreign trade to or from any one of
(a) one of the contract parties has the Nordic states
its principal place of business in a (3) Norwegian courts have authority to
Convention state, and; set aside a forum selection clause if it
(b) the designated exclusive forum is in puts constraints on the plaintiffs right to
a Convention state. opt to institute proceedings at any one
of the places listed below:
Importantly, the Convention states may (a) the principal place of business or,
not pass domestic legislation in conflict in the absence thereof, the habitual
with the Convention, the only exception residence of the defendant;
being rules of other conventions which (b) the place where the contract was
the state has ratified or acceded to and made, provided that the defendant
which provide special regulation on has there a place of business or agency
certain aspects of law10. Thus, Article 17 through which the contract was made;
of the Lugano Convention will prevail (c) the place of delivery of the cargo
over the 1994 Act, as the latter is based into custody of the carrier, according to
on the Hague-Visby Rules which contain the contract of carriage; or
no provisions on jurisdiction. (d) the agreed or actual place of
delivery of the cargo from the custody
It should be noted that the Convention of the carrier, according to the contract
only applies to agreements whereby a of carriage.
court of a Convention state has been (4) Norwegian courts have authority
designated. Arbitration clauses fall to exercise jurisdiction when forum
outside the scope of the Convention. selection clauses are set aside for
reasons mentioned above.
In view of the above it appears that, in (5) Norwegian courts do not have
ocean trade between any of the Nordic authority, by virtue of Articles 310 and
States and any Lugano Convention 311, to set aside forum selection clauses
state, a bill of lading clause affording in charterparties.
exclusive jurisdiction to a court within a (6) Norwegian courts do not have
Lugano Convention state would have authority, by virtue of Articles 310 and
to be upheld by Norwegian courts, 311, to set aside forum selection clauses
notwithstanding the provisions of in bills of lading or similar documents
Article 310 of the 1994 Act11. of title concerning carriage to and from
places outside the Nordic states, unless
The states which have ratified or one of the criteria set out in Article 310
acceded to the Lugano Convention (1) (a) or (b) is met.
are12: Austria, Belgium, Denmark, (7) The plaintiff may exercise his option
Finland, France, Germany, Greece, to institute court proceedings before
Iceland, Ireland, Italy, Luxembourg, the the contract forum. As the carrier may
Netherlands, Norway, Portugal, Spain, be the plaintiff negative actions
Switzerland, Sweden and the United before the contract forum may be
Kingdom. allowed.

6 Article 311 first paragraph.


7 Article 310 second paragraph and 311 second paragraph.
8 See Article 31 of the Norwegian Civil Procedure Act of 1915.
9 See Article 36 of Norwegian Civil Procedure Act of 1915.
10 The Hamburg Rules would have constituted such a convention, due to its Articles 21 and 22 governing the validity of contract forum selection
clauses.
11 The only exception might be if litigating before the selected forum would effectively and substantially lessen or limit the liability of the carrier, and
thereby lead to breach of Article III Rule 8 of the Hague-Visby Rules. This is so because an international convention which imposes rules which lead to
breach of obligations of another convention should be interpreted restrictively.
12 As of July 1996.

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69

Non-order bills fully


Gard News 173,
February/April 2004

in order after the


RAFAELA S?
By Charles Debattista, Professor of Commercial Law,
University of Southampton
non-transferable bills of lading, the of Goods by Sea Act 1971. That issue in
word negotiability rather ambivalently turn depended in large part on whether
being used also to refer to a quite the goods were covered by a bill of
different concept, namely the ability of lading or any similar document of title
certain documents, including bills of within article I(b) of the Hague-Visby
lading, to rank one traders ownership of Rules and it was that question in which
goods above that of another where both most judicial effort was invested.
have been the victim of fraud. The use of
the phrase negotiable bill of lading for The decision
transferable bills and non-negotiable The claimants, hoping for the more
bills of lading for non-transferable ones generous Hague-Visby measure of
has, however, stuck and the important limitation, argued that the non-order
thing here is to identify the non- bill was covered by article I(b) of the
transferable bills to be the bills to which Rules. The demise-charterer, keen
the RAFAELA S refers. to benefit from the lower limitation
applicable under the counterpart US
A bill of lading declares itself to be legislation which applied the Hague
transferable or non-transferable Rules, argued that the non-order bill
primarily, though not exclusively,2 in the was not a document of title for the
consignee box on the front of the bill. If purposes of the UK Act.
the bill of lading states that the carrier
will deliver the goods to the order of a A strong arbitral panel and Langley
consignee or simply to order, then that J3 had held for the demise-charterer,
It is some time since a case on bills of makes the bill of lading transferable; if it following the traditional view that a
lading attracted as much immediate does not, then that makes the bill non- non-order bill was not a document of
interest as the RAFAELA S, decided transferable or straight. At the risk of title. A powerful Court of Appeal held
by the English Court of Appeal and burdening usage with yet more, but, it unanimously for the claimants, deciding
reported at [2003] 2 Lloyds Rep. 113. is suggested, more transparent labels, that a non-order bill of lading expressly
bills of lading come in two shapes: requiring presentation for delivery was
The pages of Gard News have already order bills, which are transferable, a similar document of title for the
carried notes on the RAFAELA S in and non-order bills, which are not. purposes of the Rules.
issues No. 169 and 1711 and the case
has also occasioned much comment in The facts In the leading judgment, Rix LJ
both the trade and in legal journals. It Given the significance for the trade reviewed many authorities, judicial and
is now well known in the trade that the of the issues the judgment raised, the otherwise, both English and foreign:
decision applied the Hague-Visby Rules facts in the RAFAELA S were relatively declaring himself not unhappy to
to straight bills of lading. The purpose unremarkable. A cargo claim was reach the conclusions he reached, Rix
of this note is to set out the precise brought against a demise charterer LJ saw no reason why a document
limits of the decision, identifying by the buyer of goods under a non- which has to be produced to obtain
settled questions untouched by it and order bill of lading expressly requiring possession of the goods should not be
highlighting others which it leaves presentation for delivery, the goods regarded in an international convention
unresolved. having been originally shipped in as a document of title.
Durban but then transhipped in
Order/Non-order bills of lading Felixstowe and eventually discharged The effect of the judgment is that a bill
At the crux of the RAFAELA S lie some in a damaged state in Boston. These of lading calling itself a bill of lading,
fundamental distinctions between facts raised a number of important made out to a named consignee
different types of bills of lading. One of contractual issues which logically without the words to order added
the traditional fault-lines against which preceded the substance of the decision to that name or elsewhere in the bill4,
bills of lading have been classified actually delivered: did the claimants and which expressly requires the bill
has been the distinction between have title to sue at all and, if they to be presented for delivery of the
negotiable and non-negotiable bills did, was there one contract or two goods, is covered by the Hague-Visby
of lading, differentiating bills of lading and where was the port of shipment, Rules in any of the situations described
according to whether their transfer, with Durban or Felixstowe? Both the in article X of those Rules, i.e., if the
or without endorsement, in full or in parties and the court were, however, bill of lading is issued in a contracting
blank, can transmit from one trader to the quite rightly alive to the fact that the state, if the carriage was from a port in
other the right to ask the carrier for the real issue was whether, assuming the a contracting state or if the bill of lading
goods. Given the purpose of this note, defendant was liable, that liability incorporates the Rules.
it might assist clarity if bills of lading, was subject to the package and unit
distinguished against this criterion, were limitation of the Hague-Visby Rules, The decision itself, with respect, brings
actually referred to as transferable and implemented in the UK by the Carriage to an old question a refreshing air of

Gard AS, March 2011


70
common sense, robustly fitting the to the ownership of the goods be Matters left unresolved
law to commercial reality. A document defeated by A? In a dispute as to the The issues described so far were
which, as the judgment put it, looks ownership of the goods between A relatively clearly settled before the
and smells like a bill of lading should and B, B would prevail, the non-order decision of the Court of Appeal in the
not be considered any the less a bill of bill being a document used in the RAFAELA S. Neither were they raised in
lading for the purposes of the Hague- ordinary course of business as proof the case nor should they be affected by
Visby Rules simply because, when of the possession or control of the it, given that the decision was limited
issued, the shipper and the carrier goods.7 Fifthly, can a seller in a CIF in terms to the applicability of the
know that one party and one alone contract or in an FOB contract requiring Hague-Visby Rules to non-order bills of
will collect them on discharge. It the tender of shipping documents lading. The decision did, however, raise
seems curious that the more singularly tender for payment in a cash against in discussion other issues not strictly
identified the consignee, the less documents sale a non-order bill of necessary for decision.
certain English law was before the lading? The answer is that, despite the
decision in this case whether or not fact that the RAFAELA S has decided Hague-Visby and presentation
to apply an international convention that a non-order bill of lading is a The first was whether the Hague-Visby
intended to protect an unidentified document of title for the purposes Rules would have applied had the
body of consignees. of the Carriage of Goods Act 1971, a bill of lading not expressly required
seller can not tender such a document presentation. It will be recalled that
It is easy, however, wildly to draft wide unless the sale contract expressly the bill of lading in the RAFAELA S
headlines on the basis of the relatively so provides. A documentary sale on expressly required presentation for
small print of the judgment. There are a shipment terms, such as a CIF or C&F delivery and the point remains moot
number of questions about non-order contract, or an FOB contract where the whether the decision would have gone
bills which were not touched upon in seller is charged with the procurement the same way had the bill of lading
the RAFAELA S but which were and and tender of shipping documents, is not expressly required presentation
should remain fairly uncontroversial; one which requires the seller to transfer for delivery. Rix LJ clearly thought that,
and others, whether referred to or control of the goods in such a manner although on the facts of the case it was
not in the judgment, which remain as to allow the buyer to repeat the unnecessary to decide the point, the
controversial. process by transfer or endorsement. absence of the presentation clause
Consequently, in the absence of an would have made little difference to
Settled matters untouched by the express term in the sale contract his decision that the Hague-Visby Rules
decision providing otherwise, tender of a non- applied.8
In the first class of questions fall the order bill of lading would put the seller
following. First, can the consignee in breach. Delivery and presentation
named on a non-order bill of lading There is, however, lurking slightly
claim delivery of the goods from the Finally, can a non-order bill of lading be below the surface of this Hague-Visby
carrier? The answer to that question tendered for payment under a letter of question, a different and rather more
is that he can, so long as he remains credit? The answer is that it can, for one troubling issue, namely the question
identified as the consignee on the of two reasons: either because article of delivery and presentation: should
bill.5 Whether in addition to being the 23 of the Uniform Customs and Practice a carrier require presentation of a
consignee, he also needs to present the for Documentary Credits (the UCP non-order bill in the absence of a
bill of lading for delivery of the goods is 500) does not provide in terms that a presentation clause? This question was
another matter to which we shall return marine/ocean bill of lading tendered at two removes from the dispute before
later. Secondly, can the consignee under that article need be made out the court: the question before the court
named on a non-order bill of lading to order; or because a straight bill of was whether a non-order bill of lading
sue the carrier on the contractual terms lading can be tendered in the same expressly requiring presentation was
contained in the bill of lading? The manner as can a non-negotiable sea covered by the Hague-Visby Rules.
answer to that question is that he can waybill under article 24 of the UCP 500. The issue being discussed here is
for the same reason and on the basis The important point to make again, whether a non-order bill not expressly
of the same sources in the Carriage of however, is that the fact the RAFAELA requiring presentation needs to be
Goods by Sea Act 1992. S has decided that a non-order bill of presented to the carrier in order (a) to
lading is a document of title for the entitle the receiver to the goods and
Thirdly, can the named consignee purposes of the Carriage of Goods by (b) to discharge the carriers delivery
transfer those rights by endorsing Sea Act 1971 does not mean that such a obligations.
the bill of lading to an on-buyer? The bill secures, without more, the position
answer to that is no, because this is of the bank against a defaulting Prior to Rix LJs judgment in the
the essence of the non-transferable customer, i.e., a receiver who has RAFAELA S, it seemed safe to suggest
nature of the document.6 Fourth, if a obtained delivery of the goods without that if, as the English Law Commission
fraudulent seller were to sell the same presentation of the bill and without indicated in Rights of Suit in respect
goods twice, transferring a non-order paying the issuing bank under the letter of Carriage of Goods by Sea,9 non-
bill to B for value, having already been of credit. This is why carriers frequently order bills were to be treated as being
paid for the goods by A, who had find banks being named as consignees akin to sea waybills, then a consignee
originally appeared as the consignee on non-order bills of lading or on sea named as such on a non-order bill
on the bill of lading, would Bs title waybills. not expressly requiring presentation

1 See also Loss Prevention Circular No. 06-03.


2 See the HAPPY RANGER [2002] 2 Lloyds Rep. 357 at 363 and 367.
3 [2002] 2 Lloyds Rep. 403.
4 Or, which presumably would amount to the same thing, the printed words to order deleted.
5 See the Carriage of Goods by Sea Act 1992, ss. 2(1)(b), 1(3), 5(3) and Rights of Suit in Respect of Carriage of Goods by Sea, Law Com. No. 196, para
2.50: Where a bill of lading is not transferable, it will undoubtedly fall within the definition of sea waybill to be found in clause 1(3) of the [Act].
6 Should the consignee wish so to transfer, he would need the co-operation of the original shipper to alter the carriers delivery instructions: see
Debattista, Sale of Goods Carried by Sea, 2nd ed. (1998), para 3-09.

Gard AS, March 2011


71
would be entitled to delivery without is sufficient for delivery when the bill is S itself, but with two decisions taken
presentation. The Carriage of Goods by used in non-transferable form. when the Carriage of Goods by Sea
Sea Act 1992 would give the consignee Act 1992 was drafted: first, the decision
rights of suit by virtue of his status as a Estoppel and non-order bills to exclude straight consigned bills
consignee and the most important right Finally, the decision in the RAFAELA S of lading from the definition of bills
that status would endow is the right to raises an issue which was not referred of lading in the 1992 Act and then,
delivery without presentation.10 to in the decision itself but which curiously, to characterise as sea waybills
leaves non-order bills sitting somewhat documents calling themselves bills
After the RAFAELA S, however, this uncomfortably across two English of lading; and secondly, the decision
must be subject to doubt. Rix LJ clearly statutes relating to the carriage of to include section 4, dealing with the
took the view that the carrier should goods by sea. As we have seen, the evidential force of bills of lading, in the
insist on presentation for delivery Carriage of Goods by Sea Act 1992 1992 Act, an Act focusing on another
whether or not the bill of lading considers non-order bills to be akin to matter entirely, namely the buyers title
expressly required it: A shipper needs sea waybills. As a result, the consignee to sue the carrier in contract.
the carrier to assist him in policing his named on such a bill does not enjoy
security in the retention of the bill the benefit of the estoppel granted by A welcome decision raising urgent
In any event, if proof of identity is section 4 of the Carriage of Goods by questions
necessary,what is wrong with the bill Sea Act 1992 to lawful holders of order The RAFAELA S is a welcome decision
itself as a leading form of proof?11 bills of lading binding the carrier to for a number of reasons. First, it
The difficulty is that if Rix LJs view is statements about the goods on the bill answers the question posed by the
upheld, the bill itself becomes not only of lading. After the RAFAELA S, on the question asked in the litigation clearly
a leading form of proof but the only other hand, a straight consigned bill of and robustly. Secondly, it provokes
form of proof and it has to be asked lading is to be considered as a bill of questions about some of the most
whether this is what the market has lading for the purposes of the Carriage fundamental questions regarding the
in mind when the magical words or of Goods by Sea Act 1971. Under this legal classification of bills of lading.
order are left out of the consignee Act, the consignee takes the benefit Some of those questions remain to be
box. of the estoppel created by the second solved, either by appropriate clauses
sentence of Article III Rule 4 of the in bills of lading or by further guidance
In the circumstances of the resulting Hague-Visby Rules binding the carrier from the English courts.
uncertainty, the options left open to to statements about the goods on the
a carrier regarding presentation of a bill of lading.12 The result is that there is
non-order bill are either to insist on a direct conflict between the two Acts
presentation whether or not a bill of on the same issue.13 Which is it to be: is
lading expressly requires it, or (if he a straight consigned bill of lading to be
prudently wants to avoid the legitimate regarded as a sea waybill, in which case
complaints of a consignee seeking to the receiver has no estoppel under the
enforce his delivery rights at a discharge 1992 Act, or simply as a bill of lading, in
port through the Carriage of Goods by which case the receiver has an estoppel
Sea Act 1992) to stipulate in his bill of under the 1971 Act? The problem lies
lading that delivery on proof of identity not with the judgment in the RAFAELA

7 Sale of Goods Act 1979, s 24 and Factors Act 1889, s 1(4). This would clearly be the case where, as in the RAFAELA S, the
non-order bill of lading expressly required presentation for delivery. It is suggested that it would be the case even where
it did not, given that the named consignee can prove his right to possession or control of the goods, at any rate while he
retains that status.8 See [2003] 2 Lloyds Rep. 113 at 143, para 145.
9 See footnote 4 above.
10 Contrast the position in Singapore: Voss v. APL [2002] 2 Lloyds Rep. 707.
11 See [2003] 2 Lloyds Rep. 113 at 144, para 145.
12 At any rate unless a non-order bill of lading is regarded, rather oddly, as a non-negotiable receipt under s 1(6)(b) of the
1971 Act. Rix LJ, with respect quite rightly, found the assimilation of non-order bills of lading to non-negotiable receipts quite
unconvincing: see [2003] 2 Lloyds Rep. 113 at 132, para 85.
13 In the context of another question, Rix LJ suggested that, as the Carriage of Goods by Sea Acts of 1971 and 1992 dealt
with different matters, it counted little if non-order bills were treated differently in the two Acts: see [2003] 2 Lloyds Rep.
113 at 143, para 141. The estoppel point made here in the text, however, is a matter dealt with differently in both Acts and
therefore, it is respectfully suggested, does require a reconciliation between the two Acts.

Gard AS, March 2011


72

Rules apply to straight


Gard News 178,
May/July 2005

bills - House of Lords


decides RAFAELA S
The House of Lords has decided that a similar document of title within the pointed out that even an order bill might
straight bill of lading comes within the meaning of article 1 (b) of the Hague- not be duly endorsed in circumstances
class of documents to which Hague-Visby Visby Rules.5 If it was, the straight bill where the named consignee might
Rules are applicable in English law. of lading was a contract of carriage to require delivery as holder of the bill.
which the Rules applied compulsorily. Therefore, in Lord Binghams mind it
Introduction The reason why this was important to the would be extraordinary to treat the
There was once a bill of lading so cunning claimants, who were the buyers of the detailed terms of a bill as inapplicable
that it exercised the minds of many a cargo and named consignees, was that to a named consignee holding a straight
lawyer, arbitrator, judge and academic. It the relatively generous package limitation bill, especially when the shipper did not
has also been the subject of several Gard under article 4 Rule 5 of the Rules would wish to part with an original bill until
News articles.1 Now the House of Lords2 have been applicable, resulting in a claim the consignee or buyer had paid for
has sought to end a dispute that began of around USD 150,000. On the other the goods. In other words, requiring
in earnest with three arbitrators in 2001. hand, the carrier (who was appealing the production of the bill to obtain delivery
On appeal a judge in the Commercial Court of Appeal decision) contended was the most effective way of ensuring
Court agreed with the arbitrators, but the that the straight bill of lading was akin to that a consignee or buyer who had not
Court of Appeal disagreed, deciding that a sea waybill, which merely operates as paid could not obtain delivery. Therefore,
a straight bill of lading expressly requiring a receipt. It was not therefore a contract the bill in this case was, as in the case of
presentation for delivery was a bill of of carriage within the meaning of article an order bill, a document of title, or a
lading or similar document of title for 1 (b) and the Rules did not apply. If the key which in the hands of a rightful owner
the purposes of the Hague-Visby Rules carrier was correct, the package limitation is intended to unlock the door of the
(the Rules). The House of Lords has now would have been governed by section warehouse, floating or fixed, in which the
unanimously upheld this decision. 4(5) of the US Carriage of Goods by Sea goods may chance to be.8
Act 1936 (which applied contractually),
It was not disputed that the bill in restricting the claim to USD 2,000. Lord Steyn also pointed out that, in
this case was a straight bill of lading. practice, it is left to the shipper to
A straight bill of lading is generally Construction of the document itself choose the words to be inserted in the
accepted to be one that makes the The House of Lords first looked at the consignee box. Following the carriers
goods deliverable to a named consignee document itself. Lord Bingham identified argument, therefore, the application of
and either contains no words importing a number of features of the bill which the Rules depended on a decision by the
transferability or contains words distinguished it from a mere receipt or shipper, usually made after the contract
negating transferability (such as non- sea waybill. For a start, the document of carriage was made, whether to insert
transferable).3 Accordingly, it is not a called itself a bill of lading. It provided for the words to order in the consignee
transferable or negotiable document of the issue of more than one original and box. Lord Steyn also commented that,
title, which can be used to transfer the used language in the attestation clause6 in any event, the issue of a set of three
right to possession of the goods covered which would have been meaningless in a bills of lading, with the provision one
by the document from one trader to sea waybill. The conditions on the reverse of which being accomplished, the
another. Bills of lading that are made of the document also envisaged that others to stand void necessarily implies
out to order are, by endorsement, the consignee and bill of lading holder that delivery will only be made against
negotiable documents of title. Bearer might become a party to the contract of presentation of the bill of lading.
bills of lading are negotiable without carriage.7 The carrier argued that the bill
endorsement.4 of lading form could be used as either What the Hague and Hague-Visby
a straight bill, and that if it was used as Rules intended
The sole issue on the appeal before the the latter some of the stated conditions Lord Binghams conclusion on the issue of
House of Lords was whether a straight (such as the attestation clause) were construction would have been sufficient
bill of lading was a bill of lading or any inapplicable. However, Lord Bingham to dispose of the appeal, but the correct

1 See articles Straight bills of lading Not so straightforward in Gard News issue No. 169, Straight bills of lading One more piece in the puzzle in
Gard News issue No. 171 and Non-order bills fully in order after the RAFAELA S? in Gard News issue No. 173.
2 J I MacWilliam Company Inc v. Mediterranean Shipping Company [2005] HL 11, still unreported at the time of going to press.
3 The RAFAELA S bill of lading used the term non-negotiable. Whilst the term negotiable is not strictly accurate when used in the context of
transferability, it is commonly used in that sense. For an in-depth explanation see the article Non-order bills fully in order after the RAFAELA S? by
Charles Debattista in Gard News issue No. 173.
4 As did Lord Bingham in the House of Lords judgment, this article will use the expression order bill to embrace a bill to order or assigns or bearer
without distinguishing between these.
5 And hence within section 1(4) of the Carriage of Goods by Sea Act 1971.
6 IN WITNESS whereof the number of Original Bills of Lading stated above all of this tenor and date, has been signed, one of which being accomplished,
the others to stand void. One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order.
7 The first clause read: This contract is between the Merchant and the Master, acting on behalf of the Carrier. Wherever the term Merchant occurs in
this Bill of Lading, (hereinafter B/L) it shall be deemed to include the Shipper, the Consignee, the holder of the B/L, the receiver and the owner of the
goods.
8 Sanders Brothers v. Maclean & Co (1883) 11 QBD 327.

Gard AS, March 2011


73
approach also required consideration of be excluded or the text of the Rules any document that entitles the holder
the international consensus of those who suggested an intention to exclude them. to have the goods carried by sea. That,
had drafted the Hague and Hague-Visby in Lord Rodgers mind, would give the
Rules. Was there good reason to exclude words a broad but not inappropriate
straight bills from the Rules? interpretation, since they are designed
Historical recognition of straight The House of Lords gave weight to the to prevent parties from circumventing
bills as bills of lading fact that a named consignee would not the Rules by devising different forms of
The House of Lords recognised that normally be involved in negotiating shipping document.
the focus of discussion preceding final the terms of a bill of lading and on this
adoption of the Hague Rules was on basis it needed the same protection In conclusion, therefore, the House of
order bills, but suggested that was as an endorsee from unfair contract Lords interpreted the Rules as intending
probably because such bills were more terms imposed by a carrier. Lord Steyn to govern the great majority of ordinary
common than straight bills and because also pointed out that straight bills are commercial shipments. Those drafting
endorsees were in need of greatest sometimes preferred to order bills of the Hague Rules were concerned more
protection from unfair contract terms lading on the basis that there is a lesser with preventing circumvention of the
imposed by carriers. The House of Lords risk of fraud. In conclusion, therefore, the Rules than restricting their scope. An
looked deeper into history and found House of Lords could not find a good expansive interpretation, rather than a
that a straight bill was recognised by reason to exclude straight bills from the restrictive one, to the expression bill of
the major maritime countries of the Rules. lading or any similar document of title
early 1920s as a bill of lading and, in was therefore deemed apt. The point was
most cases, a document of title. The Did the text of the Rules suggest an made that, had there been an intention
one notable exception to the latter intention to exclude straight bills? to exclude straight bills from the Rules,
was the United States where, under The House of Lords made reference to then surely there would have been a
the Pomerene Bills of Lading Act 1916, articles 1 (b) and 5 of the Hague and special provision to that effect.
carriers were to be justified in delivering Hague-Visby Rules.10 In the Lords minds
to the consignee named in a straight bill this explained the intention to apply the Recent decisions
without production of the bill. Rules to third parties. Reference was then The House of Lords went on to support
made to Section 1(6) of the 1971 Carriage their conclusions by recent decisions in
As for the UK, Lord Rodger made of Goods by Sea Act and to Article 6 of other jurisdictions, including those of
reference to a uniform British form of bill the Hague Rules. Lord Bingham helpfully a Dutch court,11 the Court of Appeal of
of lading, originally with a supposed date summarised: Singapore12 and the 2nd Division of the
of 1820, which did not include the words Thus a carrier and shipper can in effect Court of Appeal of Rennes,13 all of which
order or assigns and the commentary contract out of the Rules but only if (a) no concerned straight bills.
on that form accepted there could have bill of lading has been or is to be issued,
been a valid bill of lading for delivery to (b) the agreed terms are embodied Lord Rodger also rejected Justice
a named consignee alone. Lord Rodger in a receipt, (c) the receipt is a non- Tomlinsons suggestion (obiter) in the
went on to comment that the mercantile negotiable document marked as such, HAPPY RANGER14 that the term bill
community had been discussing whether (d) the shipments in question are not of lading in article 1 (b) should not be
the inclusion of the words order or ordinary commercial shipments made in interpreted as including straight bills of
assigns was necessary to make a bill of the ordinary course of trade, and (e) the lading.15
lading negotiable not whether their character or condition of the property to
inclusion was necessary for the document be carried or the circumstances, terms COGSA 1992
to function as a bill of lading. and conditions under which the carriage The complication caused by the Carriage
is to be performed are such as reasonably of Goods by Sea Act 1992, namely that
The carrier tried to make something to justify a special agreement. a straight bill of lading is not a bill of
of the Preface to the UKs own Bills lading for the purposes of the Act (which
of Lading Act of 1855,9 which only Like the Court of Appeal, the House of mainly concerns rights of suit), was
referred to bills of lading transferable Lords found that there was nothing in brushed aside by the House of Lords.
by endorsement. However, the House the travaux prparatoires of the Hague Lord Bingham pointed out that a 1992
of Lords pointed out that Section 1 Rules which pointed to a clear resolution statute can not govern the meaning of
of the same act provided that not of the issue. Lords Steyn and Rodger in Rules given statutory force in 1924 and
only an endorsee but also every particular considered the French text to 1971 and that the 1992 Act itself provides
consignee named in a bill of lading was the Hague Rules which focused on the that it is to have effect without prejudice
empowered to sue on it. If the carriers right to possession of the goods vesting to the application of the Rules.16 Lord
restrictive interpretation was accepted, in the holder of the document without Bingham also stressed that the question
there would have been a major gap in reference to the concept of document before the House was not whether a
the act because a named consignee in of title. As Lord Rodger put it, the straight bill was a document of title at
a straight bill of lading would not have alternative document which the French common law, but whether it was a bill of
had rights of suit under the bill. Such an text described was simply one that lading or any similar document of title
implausible interpretation was therefore entitled the holder to have the goods for the purposes of the Rules.
rejected. carried by sea and, obviously, to have
them delivered to the appropriate person Academics and Practitioners
The House of Lords thus concluded at the end of the voyage. The French text Lord Bingham regarded Lord Justice Rixs
that historically straight bills were would therefore suggest that the words conclusion (in the Court of Appeal) of
recognised and were not ignored in the document of title in the English version his review of the leading academic and
Hague Rules negotiations. Accordingly, should be read along with the qualifying practitioner texts, as a fair assessment.
the Rules ought to be interpreted as words in so far as such document relates Lord Justice Rix found the position
applying to straight bills unless there was to the carriage of goods by sea and complex and mixed. On the one hand
either a good reason why they should should be understood as applying to some quarters held the view that the

9 Which primarily dealt with rights of suit and which was still in force at the time of events in this case.
10 Which provide that the Rules do not apply to charterparties and apply to bills of lading issued under charterparties only from the moment at which
such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same.

Gard AS, March 2011


74
surrender of an original bill of lading was particular note, Lord Rodger said that need a transferable19 document (because
unnecessary under a straight bill, but on negotiability or transferability of the bill for example he does not intend to sell
the other hand uniformity favoured just of lading is irrelevant as indeed is its the goods to anyone other than a named
the opposite. status as a presentation document. consignee), a non-transferable document
ought to be sufficient. If, in addition, a
Lord Steyn made the comment that A question which follows is whether the shipper does not need the security of a
the interpretation advanced by the House of Lords decision hints towards document which requires presentation
carrier depended on fine and technical a call to apply the Rules (compulsorily) of the original in order to obtain delivery
distinctions and arguments. Traders, to waybills. The answer is far from of the goods (for example, the shipper
bankers and insurers would be inclined straightforward. On the one hand, and named consignee are part of the
to take a more commercial view of the House of Lords went to lengths same company and there is no risk
straight bills of lading. Lord Steyn to differentiate the straight bill from a of the consignee not paying for the
noted that Professor Charles Debattista waybill. Notably, Lord Steyn said that goods), a sea waybill will usually be most
had welcomed the Court of Appeals the comparison is plainly unrealistic and appropriate. It will then be important to
decision.17 that a sea waybill is never a document ensure that the sea waybill calls itself a
of title. On the other hand, the Lords sea waybill, is clearly marked non-
What the House of Lords decision commentary on the French text of the negotiable and expressly provides that
means The application of the Rules Hague Rules, as mentioned above, the goods are to be delivered without
In dismissing the carriers appeal and suggests that there ought to be a broad production of an original waybill, but on
upholding the Court of Appeals decision interpretation to the words bill of lading production of proof of identity by the
that a straight bill of lading is a bill or any similar document of title. named consignee.20 A carrier should,
of lading or any similar document of however, also bear in mind the risk of
title within the meaning of the Rules, The carriers delivery obligations fraud and in some countries that risk is
the House of Lords has brought much It is relatively clear from the House of greater than others. Equally, demanding
needed clarification to the application Lords decision that under English law the production of an original bill of lading
of the Rules. Carriers issuing straight a carrier who delivers cargo carried will not always prevent fraud.21 Carriers
bills may now be unable to contract under a straight bill of lading expressly may face difficulty persuading shippers
out of the Rules, notably with regard to requiring presentation of an original to use waybills rather than bills of lading,
package limitation. Article 3 Rule 4 of the without production of the original does due to a natural reluctance to change
Hague-Visby Rules binding the carrier to so at his own peril. As mentioned above and general scepticism that change
statements about the goods on the bill of there are indications in Lord Bingham equates to a worse deal. The waybill is
lading will also probably apply in the case and Lord Steyns opinions that this may not intended to have all the functions of
of straight bills.18 Whilst the House of be the case, even if the straight bill of a bill of lading and it is precisely because
Lords decision is limited to the position lading does not expressly provide that some shippers did not need functions
under English law, it will doubtless have production of the bill is a necessary affording negotiability and security that
some influence on the decisions made by pre-condition of requiring delivery. But the waybill was developed. It is a matter
courts of other nations. would production still be necessary if the of education.
bill contained an express provision that
The bill of lading in the RAFAELA S delivery is to be made without production P&I cover
contained an express provision that of the original bill of lading? This According to Rule 34 of Gards 2005
delivery of the cargo was to be made question seems to remain unanswered Statutes and Rules, cover is excluded
only against presentation of an original. for the time being, but whatever the for liabilities, costs and expenses
It appears that, at least in Lord Binham answer may be, the safest policy for arising out of the delivery of cargo under
and Lord Steyns opinion, the absence carriers would be to deliver goods only a negotiable Bill of Lading without
of this clause would not preclude the bill upon production of the original straight production of that Bill of Lading by the
from being a bill of lading or any similar bill of lading in all cases. person to whom delivery is made except
document of title within the meaning where cargo has been carried on the
of the Rules. However, it is not clear from Recommendation Ship under the terms of a non-negotiable
the House of Lords decision whether the The judgments of the Court of Appeal Bill of Lading, waybill or other non-
Rules would also apply (compulsorily) to and the House of Lords in RAFAELA S negotiable document, and has been
a straight bill of lading which expressly suggest a dislike of bill of lading forms properly delivered as required by that
provides that delivery is to be made that are designed to fulfil different document [our emphasis].
without production of an original bill functions depending on the way in which
of lading. Whilst it is uncertain whether the form is used and completed. The word properly has been
under English common law such a bill emphasised here and it will be apparent
of lading is a document of title, there is Gards recommendation is that the carrier from this article that for P&I cover to
commentary to be found in the House should seek to clarify with shippers be available much depends on the
of Lords decision to suggest that the what functionality they require from the applicable law and the document itself.
Rules should be applied regardless. Of carriage document. If a shipper does not

11 The Duke of Yare (ARR-RechtB Rotterdam, 10th April 1997).


12 Voss v. APL Co Pte Limited [2002] 2 Lloyds Rep 707. See article Straight bills of lading Not so straightforward in
Gard News issue No. 169.
13 On appeal from the Commercial Court of Le Havre in The MSC MAGALLANES.
14 [2001] 2 Lloyds Rep 530, 539.
15 The Court of Appeal reserved their opinion on the point but expressed doubt about statements to a similar effect in some textbooks.
16 Section 5(5) of the 1992 Act. See also the article Non-order bills fully in order after the RAFAELA S? in Gard News issue No. 173.
17 In Lloyds List of 23rd April 2003. See also Charles Debattistas article in Gard News issue No. 173.
18 See Charles Debattistas article in Gard News issue No. 173.
19 See footnote 3.
20 See for example the BIMCO Liner Sea Waybill.
21 See the article The MOTIS revisited The Court of Appeal turns down owners appeal in Gard News issue No. 158, concerning delivery made against
a fraudulent bill.

Gard AS, March 2011


75

FIOS revisited - The final Gard News 177,


February/April 2005

chapter?

Previous issues of Gard News1 have standard clause paramount. The initial goods arising from negligence, fault
reported on the High Court and Court claim arose as a result of damage to the or failure in the duties and obligations
of Appeal decisions in the JORDAN cargo. It was agreed that the damage provided in this Article or lessening
II case.2 On 25th November 2004 the had occurred at some point during such liability otherwise than as provided
House of Lords gave their reasons the loading, stowing and securing in these Rules, shall be null and void
for dismissing the appeal of cargo operation, or during discharge. Both and of no effect.
interests. the High Court and Court of Appeal
decided in vessel owners favour. Cargo interests argued that Article III (2)
The facts laid down certain non-delegable duties
The charterparty provided that loading, The appeal that the carrier must undertake, and
stowing, lashing, securing, dunnaging The main argument of cargo interests any attempt to transfer responsibility
and discharging operations were to appeal was that the FIOS terms as for these operations to another party (in
be carried out by charterers/shippers/ incorporated in the bills of lading this case, the shippers/receivers) should
receivers. There was argument in the fell foul of Article III (2) and (8) of the fall foul of Article III (8) and be rendered
lower courts concerning the actual Hague-Visby Rules. These provide as of no effect. The stumbling block for
wording used in the charterparty, but follows: cargo interests was that a wealth of
that argument was not raised in the 2. Subject to the provisions of Article cases has been decided in the English
final appeal, cargo interests accepting IV, the carrier shall properly and courts, notably Pyrene v. Scindia3
that the terms of the charterparty were carefully load, handle, stow, carry, and Renton v. Palmyra,4 supporting
sufficient to transfer responsibility keep, care for and discharge the goods the carriers position that certain of
for these operations to them and carried. the Article III (2) obligations could
away from the vessel owners. The 8. Any clause, covenant or agreement be transferred by agreement. Cargo
bills of lading issued in respect of the in a contract of carriage relieving the interests argued that each of these
cargo incorporated the terms of the carrier or the ship from liability for loss cases had been based on an incorrect
charterparty and also incorporated the or damage to, or in connection with, interpretation of Article III (2), and

Gard AS, March 2011


76
should therefore be over-ruled in favour appeal was based more on questions long-established rule of law to be laid
of a correct interpretation of the Rules. of certainty than correctness. Lord down by Parliament, or by a convention
Steyn referred to a 1774 statement drawn up by the shipping and trading
Cargo interests referred to Pyrene of Lord Mansfield:6 In all mercantile community.
v. Scindia, where Devlin J stated transactions the great object should
that Article III (2) was not a list of be certainty; and therefore, it is of Lord Steyn referred in particular to the
obligations that the carrier must carry more consequence that a rule should current United Nations Commission on
out, but instead provided a minimum be certain, than whether the rule is International Trade Law (UNCITRAL)
standard of skill and care for those established one way or the other. review of the rules governing carriage
operations which he did perform. Cargo of goods. Such review would take
interests suggested that the natural The House of Lords referred again to into account representations of all
extrapolation of this argument was Renton v. Palmyra and stated that even interested parties, whether they be
that, if the carrier could contract out of if that decision was wrong, it should vessel owners, charterers, shippers or
the loading operation, he could also stand. That case had been decided receivers of cargo and insurers. If, after
contract out of the obligation to carry, nearly 50 years ago and there had their review, UNCITRAL believe that
keep and care for the cargo. Such an been no serious attempt to correct any a change in the rules is appropriate,
interpretation would render the whole misinterpretation. The Hague-Visby no doubt a revised convention would
scope of the Rules ineffectual. Rules were discussed and agreed be drawn up to reflect the rules as
after Renton v. Palmyra was decided, UNCITRAL believe they should be
In support of their contention, cargo and yet there was no discussion at the framed.
interests referred to a number of US conference as to whether Article III
and South African decisions and to (2) should be amended to make the However, for the time being, under
textbook commentary confirming the stated operations the non-delegable English law it is now settled that a
situation in France. All these suggested responsibility of vessel owners. carrier can contract out of responsibility
that a shipowner may not contract out for loading, stowing, dunnaging,
of responsibility for improper stowage. The House of Lords was not convinced securing and discharging cargo. There
By contrast, the English approach is that the existing rule under Pyrene v. can now be no doubt that FIOS clauses,
adopted in Australia, New Zealand, Scindia and Renton v. Palmyra caused provided they are suitably worded,
Pakistan and India. any injustice or was unsatisfactory, as are valid and have full effect. That is,
demonstrated by the numerous other at least until a revised convention is
Cargo interests raised numerous jurisdictions that followed similar agreed and adopted.
other arguments in support of their reasoning. Their Lordships felt that,
case and referred to the history of the even if the interpretation was wrong,
preparation of the Rules to suggest the rule had been in effect for so long
that the English interpretation was not it was accepted commercially as being
in conformity with the intention of the correct, and more injustice would
Rules. be caused if existing FIOS contracts
were to be rendered ineffective in
The House of Lords decision5 relieving the carrier from responsibility
Ultimately, the House of Lords did for operations he did not perform
not express any view on whether the (and there must be a great many
interpretation in Pyrene v. Scindia and such contracts currently in existence).
Renton v. Palmyra was correct or not. Their Lordships felt that it was more
Their decision to dismiss cargo owners appropriate for any change in such a

1 See articles FIOS revisited in issue No. 169 and FIOS revisited (again) in issue No. 172.
2 Jindal Iron and Steel Co Limited and others v. Islamic Solidarity Shipping Company Jordan Inc. LMLN 595, dated 5th September 2002; [2003]2 Lloyds
Rep. 87.
3 Pyrene Co. v. Scindia Navigation Co. [1954]1 Lloyds Rep. 321.
4 G. H. Renton & Co. Ltd v. Palmyra Trading Corporation of Panama [1956]2 Lloyds Rep. 379.
5 [2004] UKHL 49, 25th November 2004.
6 In Vallejo v. Wheeler (1774) 1 Cowp 143 at p. 153.

Gard AS, March 2011


77

US law - Himalaya
Gard News 177,
February/April 2005

clauses in multimodal
transport
In a recent decision involving apply to whenever claims relating of whether the bills of lading under
multimodal transport the US Supreme to the performance of the contract consideration should be considered
Court reversed the Eleventh Circuit are made against any servant, maritime contracts to which federal
and held that Himalaya clauses in agent or other person (including (as opposed to state) law should apply.
both a freight forwarders bill of lading any independent contractor) whose This, despite the fact that the trial court,
and in an ocean carriers bill of lading services have been used to perform the the Court of Appeals and the parties
extended the bill of lading COGSA contract. The shipper did not declare themselves (until the case reached
package limitation or other limitation of the full value of the machinery (so did the Supreme Court when the shipper
liability to a land carrier, which was hired not avoid these limitations) but instead objected to application of federal law),
by an affiliate of the ocean carrier. separately insured the cargo for its full had assumed that federal law would
value. govern. Rather than sidestepping the
[A] maritime case about a train issue and proceeding on the basis of
wreck. With those opening words The forwarder then arranged to have the assumed applicability of federal law,
in a unanimous decision in Norfolk the cargo carried by Hamburg Sd, the Supreme Court instead took the
Southern R. Co. v. James N. Kirby which issued its own through bill of opportunity to classify these multimodal
Pty Ltd1 on 9th November 2004 the lading (the ocean bill) to the forwarder bills of lading as maritime contracts
highest appellate court in the US, incorporating (1) the COGSA package and to emphasise the importance
the Supreme Court, signalled its limitation, (2) extending application of applying a uniform (i.e., federal)
recognition of the changing nature of of COGSA beyond the ships rail, and standard for their interpretation and
international transportation: the age of (3) a Himalaya clause extending the enforcement.
multimodalism, door-to-door transport benefit of the COGSA limitation of
based on efficient use of all available liability to all agents, including inland The Supreme Court noted that while
modes of transportation by air, water carriers. Hamburg Sd arranged to have it may once have seemed natural to
and land which allows cargo owners the cargo carried from the discharge think that only contracts embodying
to contract for transportation across port to Huntsville by Norfolk Southern commercial obligations between the
oceans and to inland destinations in a Railroad (the railroad). The train tackles (i.e., from port to port) have
single transaction. derailed and the cargo was damaged, maritime objectives, the shore is now
for which damage the shipper was an artificial place to draw a line. The
The facts reimbursed by its insurer, which joined court rejected decisions by lower
The case involved a set of facts which is the shipper in suing the railroad in courts in other cases that unless the
commonplace in the shipping industry. Georgia. The shipper claimed damages non-maritime portion was merely
The shipper, James N. Kirby, Pty Ltd, in the amount of USD 1.5 million; but incidental the contract could not be
an Australian company, sold machinery if the railroad could avail itself of the considered maritime. Noting that in
to a General Motors plant located COGSA package limitation under the any multimodal transport situation it
near Huntsville, Alabama and hired a ocean bill then the railroads liability was not accurate to ever describe the
freight forwarder, International Cargo would be limited to USD 5,000.2 The land portion as incidental because
Control (the forwarder) to arrange for railroad prevailed on this basis at the each leg of the journey is essential to
transportation of the machinery in ten trial court but the trial courts decision accomplishing the contracts purpose
containers. The forwarder issued a was reversed by the Eleventh Circuit the Supreme Court stated that a
through bill of lading (the forwarder Court of Appeals,3 which ruled that bill of lading must be considered
bill) to the shipper naming Sydney, the railroad could not limit its liability a maritime contract so long as [it]
Australia as the load port, Savannah, according to the limitation of liability requires substantial carriage of goods
Georgia as the discharge port and provided under either the forwarder bill by sea.4
Huntsville as the final destination. The or the ocean bill. In other words, the
forwarder bill contained two separate shipper and its insurer could potentially But classifying the bills of lading as
limitation of liability provisions: the US recover the full amount of their loss maritime contracts was not sufficient
Carriage of Goods by Sea Act (COGSA) (said to be USD 1.5 million) from the because there have been cases,
USD 500 per package or customary railroad. such as a Supreme Courts 1955
freight unit limitation (the package decision involving a contract of marine
limitation) for the sea portion of the The Supreme Court decision insurance, where the Supreme Court
transport, and a higher limitation for In reversing the decision of the found it appropriate to apply state law
the land portion. The forwarder bill also Eleventh Circuit Court of Appeals, to a maritime contract. And so, the
contained a Himalaya clause providing half of the Supreme Courts opinion courts opinion goes on to reiterate why
that these limitations on liability would is devoted to a lengthy examination it is so important that these multimodal

1 543 2004 U.S. Lexis 7510 (U.S. 2004).


2 Under the forwarder bill, if the limitation of liability could be used by the railroad, its liability would have been based upon the higher amount provided
for the land portion of the transport.
3 300 F. 3d 1300.

Gard AS, March 2011


78
bills of lading be subject to a uniform Comments forwarders use in the bills of lading that
body of law; and then ruling that the One can not read the Supreme Courts they issue conform to the limitations
case before it must be determined opinion without concluding that the in the bills issued by the ocean carrier.
under federal (rather than state) law. court was prepared to ignore or to Ocean carriers (and their downstream
adjust traditional legal concepts, such carriers, such as the railroad in this case)
Of course, that is precisely what the as privity of contract and agency, need now concern themselves only
Court of Appeals thought it was doing because the court concluded that with their own bills of lading, without
applying Supreme Court precedent that these concepts do not necessarily concern that they may be bound
the Court of Appeals thought required serve the needs or expectations of the by a higher limitation provision in a
it to rule against the railroad. Not so, players in the new world of multimodal freight forwarders bill. Perhaps most
according to the Supreme Courts transportation. As the court stated in significantly, all concerned in the sea-
opinion. With respect to the forwarders justifying its limited agency rule for and-land multimodal enterprise should
bill, it did not matter that the forwarder freight forwarders: In intercontinental now be able to rely on their contracts
had never contracted with the railroad ocean shipping, carriers may not know being enforced in the US under a
or that the Himalaya clause did not if they are dealing with an intermediary, uniform body of law.
specifically mention inland carriers (as rather than with a cargo owner. Even if
did the ocean bill). It was sufficient that knowingly dealing with an intermediary,
the parties [i.e., shipper and forwarder] they may not know how many other
must have anticipated that a land intermediaries came before, or what
carriers services would be necessary for obligations may be outstanding among
the contracts performance. Similarly, them. If the Eleventh Circuits rule were
with respect to the ocean bill, which the law, carriers would have to seek out
the court readily acknowledged raised more information before contracting,
a more difficult question, the court so as to assure themselves that their
was not concerned that it was unjust contractual liability limitations provide
to limit the liability of the railroad to true protection. That task of information
the COGSA package limitation when gathering might be very costly or even
the shipper had agreed in its own impossible, given that goods often
contract with the forwarder that the change hands many times in the course
land portion of the transport would be of intermodal transportation.
subject to the higher limitation. Instead,
the court reasoned that Hamburg Sd While recognising that it is not the
(and its subcontractor, the railroad) Supreme Courts task to structure the
justifiably relied upon the forwarder international shipping industry, the
as the shippers agent, at least for the courts opinion nevertheless represents
purpose of negotiating the terms of a conscious effort to provide parties
the limitation of liability.5 And, as the with greater predictability concerning
court noted, this produced an equitable the rules for which their contracts
result: if the forwarder failed to ensure might compensate. After the Kirby
that the contractual limitation of liability decision, freight forwarders need not
in the two bills were the same, then the find themselves in the position of the
shipper could have (and had) sued the forwarder in this case if they ensure
forwarder for the difference. that the limitations of liability that

4 It is questionable whether the Supreme Courts use of the word substantial to modify carriage of goods by sea will not result in the same type of
problem that the court was ostensibly trying to rectify in rejecting a geographic or spatial approach in favour of a conceptual one when determining
whether a multimodal bill of lading qualifies as a maritime contract.
5 Despite the courts restrictive language in describing the forwarders limited agency role (It only requires treating ICC as Kirbys agent for a single,
limited purpose: when ICC contracts with subsequent carriers for limitation on liability [emphasis in original]), the courts decision arguably leaves open
the possibility that freight forwarders should also be considered shippers agents for other material terms of bills of lading, such as forum selection
clauses. This very issue has been raised in another case now pending before the Supreme Court.

Gard AS, March 2011


79

US Law - Date alone on Gard News 173,


February/April 2004

CONGENBILL sufficient to incorporate


a charterparty into a bill of lading

A recent Second Circuit US Court of claim against owner and, as pleaded by has independent legal significance
Appeals decision affirms a US District owner, against the time charterer. On in relation to the charterparty, it
Court ruling that the appearance of appeal, cargo challenged the District certainly served to identify it which is
the date of a charterparty alone on a Courts finding that the bills of lading all that we are supposing it to do.
CONGENBILL bill of lading is sufficient properly incorporated the charterparty. The court went further by citing an
to evidence and incorporate that Cargo argued, in part, that there was analogous case, Steel Warehouse Co.
charterparty into a CONGENBILL bill insufficient reference to the charterparty v. Abalone Shipping Ltd. of Nicosai,3
of lading and thereby give effect to the in the bills of lading because the which held that a sophisticated
arbitration clause contained therein. identity of the time charterer did party has constructive notice that the
not appear on its face. Furthermore, common, internationally recognised
In Continental Insurance Co. v. Polish cargo contended that because the CONGENBILL form can incorporate a
Steamship Co.1 the US District Court word payable in that section of charterparty only by date, despite an
in New York had to determine whether the CONGENBILL stating Freight absence of the identity of one of the
bills of lading issued by the vessel payable as per charter-party had been parties to the charterparty on the bill of
owner effectively incorporated a time crossed out and replaced with the lading.
charterparty which was identified on the word prepaid, that that language of
face of the bills of lading by date only. the bill of lading was not relevant to Conclusion
This subrogated action by the cargo charterparty incorporation. The decision is significant because
insurer arose out of alleged damage an appellate court has reaffirmed
to a cargo of steel coils carried from The appeals court decision existing US precedent. If a bill of
Thessaloniki, Greece to various US The 2nd Circuit US Court of Appeals lading contains language seeking
ports. rejected cargos argument and to incorporate a charterparty and
maintained the only issue was whether expects the issuer of the bill of lading
The suit and third party action or not the bills of lading specifically to effect incorporation by inserting
The cargo insurer brought suit against identified the charterparty in question. only the date of the charterparty, then
the vessel owner and its vessel, in rem, Articulating its reasoning, the court incorporation of the charterparty and
seeking recovery for damage under noted that CONGENBILL bills of its arbitration clause is achieved by
the US Carriage of Goods by Sea Act lading are purposefully used with insertion of the charterparty date.
(COGSA).2 The owner commenced charterparties and that the first clause It is well settled under US law that a
a third party action against the time of a CONGENBILL, Conditions of party to a bill of lading (whether or not
charterer of the vessel requesting that Carriage, expressly provides All terms negotiated) into which a charterparty
any judgment in favour of cargo be and conditions, liberties and exceptions has been successfully incorporated has
entered against the time charterer or, in of the Charter Party, dated as overleaf, constructive notice of that charterparty
the alternative, that the time charterer are herewith incorporated. The court arbitration clause and, thereby, will
should be required to indemnify the observed that while it would have been be bound to arbitrate a dispute if the
owner for any judgment in favour of preferable to identify the charterparty terms of the clause apply to that party/
cargo against owner. The time charterer in more detail on the bills of lading (i.e., dispute.
moved to dismiss cargos action as by mentioning the location and parties
time barred and to stay owners third to the charterparty), the inclusion of
party claims against the time charterer the date of a charterparty together
pursuant to the arbitration clause in with references to a charterparty made
their charterparty. Owner then moved on the bills face and overleaf was
to dismiss cargos entire action by sufficient to identify the charterparty
operation of the London arbitration with specificity needed to give effect to
clause and, in the alternative, to stay the intended incorporation.
the action pending arbitration.
The appeals court was also not
The District Courts finding and persuaded by cargos argument that
the appeal the insertion of the word prepaid
The District Court dismissed cargos rendered the reference to the
action finding that the bills of charterparty on the face of the bill
lading successfully incorporated the of lading a nullity for the purpose of
charterparty and, therefore, that the incorporation. The court held that
arbitration clause applied to cargos whether or not the payment provision

1 346 F.3d 281, 2nd Cir, (N.Y.), Oct 8, 2003.


2 46 U.S.C. 1300 et seq.
3 141 F.3d 234, 237 (5th Cir. 1998).

Gard AS, March 2011


80

Appendix
Gard Guidance on Bills of

The following is an overview of the Part 3 After signing the bill of Appendices
contents of the Gard Guidance on Bills lading Appendix I
of Lading publication. 3.1 Signature under duress Extracts from the Hague-Visby and
3.2 Incorrect/inaccurate bill of Hamburg Rules
List of Contents lading signed
Part 1 General Information and 3.3 Ships copy Appendix II
Guidance Steel pre-shipment surveys
1.1 If in doubt
1.2 Functions of the bill of lading Part 4 Various other bill of lading Appendix III
and waybill issues Standard forms of letters of indemnity
1.3 Importance of the bill of lading 4.1 Early Departure Procedure
(EDP)/Signing blank bills of
Part 2 Preparing for signing bills lading
of lading 4.2 Cargo intended to be shipped
2.1 Obligations with regard to on deck
issuing and signing bills of 4.3 Delivery of cargo against a bill
lading of lading retained on board
2.2 Inspecting the cargo before 4.4 Commingling or blending
and/or at the time of loading cargo on board
2.3 Dealing with damgae found 4.5 Split bills of lading and delivery
during inspection/loading orders
2.4 Recording inspection results in 4.6 Bill of lading covering a bulk
the mates receipt cargo with more than one
2.5 Authorisation for signing bills discharge port
of lading 4.7 Delivery to a destination not
2.6 Clausing bills of lading named in the bill of lading
2.7 Checks to be made before 4.8 Letters of indemnity
signing bills of lading

Gard AS, March 2011


81

Gard AS, March 2011


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