LECTURE 7

1.0 INTRODUCTION
• Booking Notes
• Bills of Lading
• Identifying the Carrier under the Bill of Lading
• What are the Terms of the Bill of Lading?
• Who has the Right to Sue the Carrier?
• Straight Bills of Lading
• Electronic Bills
• Sea waybills
• Delivery Orders
2.0 THE SIGNIFICANCE OF MANDATORY
INTERNATIONAL CONVENTIONS
• The Scope of Regulation
• The Hague and Hague-Visby Rules
LGC | COMPENDIUM OF MARITIME CLAIMS | 6
• Carrier’s Obligations
• The Hamburg Rules
• Cargo delivery responsibilities
• Carrier’s Rights
• Package Limitations
• Time Limits
• The Hague and Hague-Visby Rules
• The Hamburg Rules
3.0 MULTIMODAL AND THROUGH TRANSPORT
• The Rotterdam Rules
4.0 LIABILITY IN TORT
• Liability in tort generally arises in two scenarios
• Protection of Third Parties
• Indemnity Claims under Charterparties
5.0 THE SIGNIFICANCE OF PROVIDING PROOF
• Carrier Source Evidence
• The Evidentiary significance of documents
• Evidence of the vessel
• Cargo Source Evidence
• Survey Evidence
• Disclosure of Evidence
6.0 LAW AND JURISDICTION
7.0 INSURANCE

 

ARGO CLAIMS

1.0 INTRODUCTION

Cargo claims can arise even when the cargo is not genuinely lost, damaged, or delayed. This typically happens when the documents that describe the cargo shipment contain inaccuracies regarding aspects like quantity, weight, or the apparent order and condition of the cargo. Consequently, the received cargo differs from the stated description, even though no events during transit can be attributed to the damage or loss. In such cases, the carrier’s misrepresentation in the cargo description can lead to claims, which pertain to the financial losses incurred by the cargo recipient. For instance, when a buyer relies on the carrier’s cargo description and pays for more cargo than actually shipped.

This issue is notably common, especially in bulk cargo shipments where some variation in measurements is often unavoidable. Claims most commonly relate to:

1. Damage to the cargo.
2. Partial or complete loss of the cargo.
3. Incorrect delivery to the wrong recipient.
4. Delays in cargo delivery.
5. Additional costs for unloading and storing damaged cargo.
6. Expenses for disposal, onward shipment, or transshipment of cargo. 7. Cargo’s share in salvage or general average.

Given these circumstances, it’s almost certain that ships will encounter cargo claims at some point. Sometimes, claims are erroneously brought when the delivered cargo quantity is less than shipped. However, this apparent “loss” is not due to the carrier’s fault but is inherent to the nature of the cargo, such as evaporation loss in certain oil cargoes. In such cases, the carrier is not liable, and legal defenses, based on common law or specific international rules like the Hague, Hague-Visby, or Hamburg Rules, can apply, depending on the applicable regulations

These claims are typically directed at the carrying ship but can also involve another ship if the loss or damage is attributed to the negligence of that other ship (e.g., in a collision where cargo on ship A is damaged due to ship B’s negligence). When claims are made against the carrying ship, they are usually brought under a contract for cargo carriage. However, if the shipowner is not the carrier under that contract (e.g., the contractual carrier is a charterer or another non-vessel-owning carrier), the claim can be pursued in contract against the responsible party under the carriage contract and/or in tort (negligence) against the shipowner.

It’s crucial to determine whether a claim is brought under a contract or in tort, as contractual claims may be subject to specific contractual and statutory defenses (e.g., exclusion clauses, time limitations, or liability limits). In contrast, tort claims may not benefit from contractual defenses unless special clauses like the Himalaya Clause, Circular Indemnity Clause, or bailment on terms apply.

Cargo claims can arise under various types of contracts in the shipping industry. These claims can either arise directly between a carrier and a cargo claimant (e.g., between a carrier and a cargo receiver under a bill of lading) or through indemnity arrangements involving a carrier who has settled the claim and another party under a separate contract.

In the context of time charters, it’s unlikely that cargo claims will be made by time charterers against shipowners since time charterers typically don’t own the cargo. However, the issue may arise based on an indemnity in a time charter. For voyage charters, the situation depends on whether the cargo receiver is also the voyage charterer (e.g., on FOB terms) or not (e.g., on CIF terms).

The choice of charter terms determines which contract governs the cargo claim and whether indemnity claims may arise between the shipowners and charterers.

 

BOOKING NOTES

A booking note can typically function as a contractual document that records the mutual agreement of parties to reserve space on a vessel for the future transportation of cargo, which may not require the entire or most of the vessel’s capacity. Usually, it outlines the terms of the agreement and stipulates that the transportation will be subject to the carrier’s standard bill of lading terms. Additionally, it commonly specifies that the booking note will be replaced by the terms of an agreed-upon bill of lading once the cargo has been shipped as scheduled. As a result, cargo claims are often pursued under the bill of lading that supersedes the booking note. However, complications can arise, and claims might be made under both contracts if the parties to the booking note and bill of lading differ

 

BILLS OF LADING

The majority of cargo claims are initiated through bills of lading, although some may arise from sea waybills. There are two primary types of bills of lading:

1. Bills of lading typically described as “negotiable” or “to order” (both terms are essentially synonymous, with “to order” being used for convenience in this context).
2. Straight bills of lading. The fundamental distinction between these two types of bills of lading lies in the use of the term “to order.” A “to order” bill specifies the recipient of the cargo by including the words “to order,” such as “to order of the shipper” or simply “to order.” In contrast, a straight bill of lading identifies the recipient without employing the “to order” phrase, for example, “to X.” The absence of “to order” limits the transferability of the bill of lading.

A “to order” bill of lading is a more intricate document than a charterparty, serving as:

1. A receipt for the goods.
2. Substantial evidence of a transferable carriage contract.
3. A negotiable document of title, allowing the holder to take possession of the cargo from the vessel.

This combination of characteristics has established the “to order” bill of lading as a pivotal element in international trade. In most international sales contracts, as goods pass from seller to buyer, the bill of lading (as a transferable carriage contract) also shifts ownership from seller to buyer, establishing a contract between the carrier and each subsequent lawful holder of the bill. The right to sue the carrier is transferred from one holder to another, meaning that the holder can file a claim against the carrier for any loss or damage incurred at any point during transit, not just after becoming the holder. Therefore, if goods are lost or damaged during transportation, the lawful holder of the bill of lading has the right to seek compensation from the carrier, even if the ultimate recipient of the goods is obligated to pay the seller for the full shipped quantity, as per the sales contract terms.

When a bill of lading is made “to order of” a named party (e.g., “to order of X”), the bill can be transferred from X to Y and subsequently from Y to Z, and so forth, through endorsement and physical delivery. However, when a bill is issued simply as “to order” without specifying a named party (a “bearer bill”), transfer is achieved solely through physical delivery without endorsement. It is possible to convert a “to order” bill into a bearer bill by endorsing it with the words “to order.” Likewise, a bearer bill can be transformed into a bill “to order” of a particular party by endorsing it in favor of that party (e.g., “to order of Y”). Subsequently, the bill can be transferred to Z and others in a similar manner. When contemplating cargo claims under bills of lading, it is typically essential to address three key issues initially:

1. Determining the carrier under the bill of lading.
2. Understanding the terms of the bill of lading.
3. Identifying the entity with the right to sue the carrier.

 

 

 

• Identifying The Carrier Under The Bill of Lading

It is crucial to always establish who serves as the carrier under the bill of lading, as this distinction determines whether a claim is made under contract or tort. The fact that goods are transported on a specific vessel does not automatically make the shipowner the carrier under any bills of lading issued for that cargo. Ships are often chartered, either wholly or in part, by other parties who utilize the acquired carrying capacity to transport cargoes for their own clients. In such cases, charterers may prefer to act as carriers under the bills of lading for these cargoes, based on commercial considerations.

This practice is common in various industries, particularly in container shipping, where operators charter space on each other’s vessels but issue their own bills of lading for cargo carried on vessels owned by different operators.

When the bill of lading explicitly names the carrier, that entity is generally considered the carrier for cargo claims related to that bill of lading. However, difficulties can arise, especially in the case of chartered vessels, when the bill of lading used does not expressly identify the carrier, and it remains unclear whether the shipowner or the charterer is intended to be the carrier. This ambiguity can exist even if the bill of lading used is the charterers’ standard form. Ultimately, the determination depends on factual analysis, considering all relevant circumstances. Initially, the answer must be sought by examining the bill of lading’s provisions alone, without factoring in external considerations like the terms of any charterparty under which the bill was issued. Reference to external factors is only made if the bill itself does not clearly identify the carrier.

When analyzing the bill of lading’s terms, certain presumptions generally apply:

– The carrier is typically not the party physically signing the bill but the party on whose behalf the signature was executed.

– Bills of lading signed by the Master personally or by another authorized individual, including charterers or their agents, typically bind the shipowners (or, in the case of bareboat charter, the bareboat charterers) as carriers.

– Bills of lading signed by charterers or someone else on their behalf, where it is evident that the signature does not intend to bind the Master, typically bind the charterers as carriers.

However, the situation can be further complicated by clauses found on the back of the bill of lading, which aim to clarify the issue but often make it more intricate. These clauses, often referred to as “Identity of Carrier” clauses, may state:

“The contract established by this Bill of Lading is between the Merchant and the Owner of the vessel named herein (or substitute), and it is therefore agreed that said shipowner only shall be liable for any damage or loss due to any breach or non-performance of … the contract of carriage.”

Complications can arise when this clause conflicts with other indications within the bill of lading, such as the bill being on the charterers’ form, featuring the charterers’ logo, or being signed for or on behalf of the charterers, suggesting that the carrier may be someone other than the shipowners. However, in such situations, precedence is given to the signature on the face of the bill and the typed or stamped text alongside it. If these elements unambiguously identify the carrier, printed terms on the back of the bill do not override that conclusion.

Despite these guidelines and presumptions, determining the carrier under the bill of lading can be challenging, and seeking legal counsel early in the process is advisable, as it can significantly impact the strategy for handling the claim

• What are the Terms of the Bill of Lading? In common law, a contract of carriage is established when the involved parties reach an agreement on the terms of transportation. Consequently, this contract can be oral and legally enforceable if the terms can be proven. However, proving these terms in oral agreements can be challenging. Therefore, parties typically document the terms in writing. It’s important to note that the written document itself doesn’t automatically become the contract; instead, it serves as the contract. evidence of the previously agreed-upon terms. In most cases, this distinction is not significant, but it becomes important if one party claims that the written contract does not accurately reflect the agreed terms and seeks rectification of the contract.

A carrier and a cargo interest generally agree on the terms of carriage before loading begins. The bill of lading, usually issued after loading is complete, essentially acts as evidence of this pre-existing contract. However, because a bill of lading is a contract meant to be transferred to a third party, such as a consignee or endorsee, who may not be aware of the precise pre-loading terms agreed upon by the carrier and shipper, the common law distinguishes between its evidentiary value. While the bill of lading is initially considered prima facie evidence of the contract of carriage while it remains in the shipper’s possession, and it can be rectified if necessary, it becomes conclusive evidence of the terms of carriage once it has been transferred to a third party who relied on the written terms. In other words, after transfer, the bill of lading is regarded as the contract itself.

Bills of lading generally fall into two basic types:

– – ‘Long’ form bills, which contain all relevant terms within a single document. ‘Short’ form bills, which aim to incorporate the terms of another document, typically a charterparty. For example, the Conlinebill is a ‘long form’ bill that presents all relevant terms on the same document’s front and reverse sides. Conversely, the Congenbill is a ‘short form’ bill designed to integrate the terms of the charterparty under which it is issued. It includes a clause stating: “… All terms and conditions, liberties and exceptions of the charter… including the Law and Arbitration Clause are herewith incorporated.” The incorporation clause’s purpose is to align the carrier’s liability under the bill with their liability under the Hague-Visby Rules. pre-existing charterparty, ensuring that the shipowner doesn’t incur additional liability under the bill of lading. However, this aim is often thwarted due to imprecise wording in the incorporation clause and the impact of the Hague or Hague-Visby Rules.

The challenge of incorporation varies between countries. Under common law, a general reference (e.g., “all clauses of the charter”) in the bill of lading’s incorporation clause won’t succeed in incorporating a clause from the charterparty that requires changes to make sense in the context of the bill of lading. Conversely, explicit reference to a particular clause (e.g., “all clauses of the charterparty including the law and arbitration clause”) can successfully incorporate it into the bill of lading, even if minor changes are needed for coherence.

However, different countries may have varying stances on incorporation, especially when third-party transferees are involved. This can lead to complex jurisdictional disputes in claims.

Furthermore, while charterparties enjoy unrestricted freedom of contract, bills of lading are often subject to regulation by international conventions, like the Hague or Hague-Visby Rules. Therefore, a clause effective in a charterparty context may be void in a bill of lading context due to the compulsory application of these rules. For example, a clause in the Gencon charter party limiting liability based on “personal want of due diligence” may conflict with the Hague or Hague-Visby Rules, which impose liability for lack of due diligence by any carrier’s servants, agents, or independent contractors. Consequently, such a clause in the Gencon charter will be nullified in the context of the bill of lading by Article III Rule 8 of the Rules.

Although these international conventions do not necessarily apply to charterparties, most charterparties will incorporate them through a Paramount Clause by agreement, aligning carrier liability under bills of lading with shipowner liability under charterparties.

• Who Has the Right to Sue the Carrier? This issue is pertinent because bills of lading are transferable contracts that may change hands several times during a voyage. For example, the shipper may transfer the bill to A on Monday, the cargo may be damaged on Tuesday, A may transfer it to B on Wednesday, who then transfers it to C on Thursday, and C finally receives the cargo on Friday. In this scenario, the shipper initiated the bill of lading contract, A was the party when the cargo was damaged on Tuesday, and C became the contractual party upon delivery on Friday. Consequently, determining who has the right to sue the carrier—whether it’s the shipper, A, or C—is essential.

Most countries adopt a pragmatic approach, granting the right to sue to the party that incurred financial losses due to the carrier’s breach of contract. In the example provided, C is likely the party with the right to sue because, even though A held the bill on the day of damage, A has probably been fully compensated under the sale contract with B, who, in turn, has been paid by C. Thus, C, the party suffering the loss, would likely have the right to sue.

The fact that C wasn’t initially party to the bill of lading contract on Tuesday is irrelevant since C later became a party on Thursday and gained the right to sue for any breach of contract during the carriage, regardless of when it occurred.

The specific basis for this pragmatic approach varies by country. Some, like the STRAIGHT BILLS OF LADING United Kingdom, have statutory provisions, such as the Carriage of Goods by Sea Act 1992 (COGSA 1992), which transfer the right to sue from one bill of lading holder to the next as the bill changes hands. Others follow traditional common law principles. Despite the pragmatic approach, technical issues can still affect a claimant’s right to sue the carrier, necessitating legal advice to confirm whether a specific claimant indeed possesses the right to bring a claim.

STRAIGHT BILLS OF LADING

A straight bill of lading shares similarities with a ‘to order’ bill of lading in several ways. It serves as

• A receipt for the goods. A straight bill of lading shares similarities with a ‘to order’ bill of lading in several ways. It serves as:
• Strong evidence of the contract for transporting the goods.
• A document of title, enabling the holder to claim the cargo from the ship.

However, it differs from a ‘to order’ bill of lading in that it can be transferred only once from the shipper to the specified receiver and cannot be passed on by the named receiver to another party. Consequently, if the cargo is designated for ‘A,’ the shipper can transfer the bill to ‘A,’ but ‘A’ cannot further transfer the bill to anyone else. Since the bill can be transferred only once, it must be presented to the carrier before cargo delivery to establish ownership of the goods. Hence, in most countries, a straight bill of lading is considered a document of title, as indicated by printed statements on many standard bill of lading forms that specify cargo release only upon presentation of the original straight bill

ELECTRONIC BILLS

While traditional bills of lading have long been effective in facilitating international trade and the movement of goods, recent challenges have arisen due to their paper-based nature. Instances of forged or counterfeit bills have highlighted this vulnerability. Additionally, the need to physically surrender the original paper bill to the carrier for cargo release or to present it to customs authorities has become a time-consuming process, especially when multiple cargo sales occur during transit. This situation often leads to significant costs, such as demurrage charges or courier services, to expedite document delivery or the provision of letters of indemnity to persuade carriers to release cargo without the original bill.

To address these challenges, the industry has explored alternatives such as electronic bills, which can offer substantial security measures. The acceptability of electronic signatures as substitutes for manual ones has been acknowledged in many countries’ laws. However, there are currently no international conventions or regulations governing the use of electronic bills, making the industry cautious about full adoption due to uncertainties and lack of recourse in case of issues. Some commercial organizations offer services enabling their members to use electronic bills for a fee. These schemes rely on contractual agreements among members rather than external governmental controls through conventions and laws, making them viable only when all involved parties are members

Initially, the International Group of P&I Clubs hesitated to provide coverage for acceptance and use. liabilities arising from electronic trading systems. However, these clubs now offer coverage for cargo carriage under such systems, provided the system is approved by the International Group. Currently, the two approved systems are Electronic Shipping Solutions (ESS) and Bolero International Ltd. If adopted by the industry, the Rotterdam Rules may recognize electronic bills (termed ‘electronic transport documents’) with the same effect as traditional paper bills, allowing for greater acceptance and use.

SEA WAYBILLS

Sea waybills resemble bills of lading but with a key distinction—they are not transferable contracts. A sea waybill serves as: • A receipt for the goods. • Strong evidence of the contract for transporting the goods. • Not a document of title, as it cannot be transferred and does not need to be presented to the carrier for cargo release.

During the voyage, the sea waybill remains a contract solely between the carrier and the shipper, and the carrier must adhere to instructions provided by the shipper. However, the waybill typically specifies the recipient’s name, enabling the carrier to deliver the cargo to that party without requiring the surrender of the waybill, as it aligns with the shipper’s instructions. Many standard sea waybill forms explicitly state this provision

Nonetheless, the carrier’s obligation to follow only the shipper’s instructions limits the sea waybill’s usefulness as a trade document. The Comité Maritime International (CMI) addressed these issues in 1990 with the CMI Rules for Sea Waybills, which are optional but can be included in sea waybills by agreement, offering the shipper the option to transfer the right to nominate the delivery recipient. This option must be exercised no later than when the carrier receives the goods. In cases of loss or damage during sea transit, the receiver may face difficulties as the waybill establishes a contract solely between the carrier and the shipper. Some countries, like the UK, have granted receivers statutory rights to sue the carrier, but in other cases, receivers may need the shipper’s cooperation to make a claim

The Hague and Hague-Visby Rules do not apply automatically to sea waybills, but some countries, including the UK, have extended their applicability through local statutes. Additionally, most standard sea waybill forms include a Paramount Clause, subjecting them to the Rules through agreement, treating the sea waybill like a bill of lading.

The Hamburg Rules do apply automatically to sea waybills since they qualify as “contracts of carriage by sea” in that they involve the transportation of goods between ports for payment of freight, without constituting charterparties.

DELIVERY ORDERS

A delivery order is a mechanism that allows a goods owner to divide the total quantity listed on a bill of lading, e.g., 1,000 tons, into smaller units, e.g., 10 delivery orders for 100 tons each. This typically occurs when a bill of lading holder initially purchases the entire cargo quantity under one bill of lading but later sells the cargo in smaller portions to various buyers. In such cases, the bill of lading holder cannot transfer the bill for the entire quantity to any individual buyer, necessitating alternative documents from the carrier, corresponding to the tonnage sold to each new buyer. Consequently, the bill of lading holder typically surrenders the bill to the carrier before or at the end of the voyage and requests the carrier to issue substitute delivery orders for each buyer, facilitating cargo delivery to individual buyers under these orders.

Each delivery order generally adheres to the terms of the surrendered bill of lading. Therefore, in theory, the carrier’s liability to each holder of the delivery orders mirrors the liability the carrier had to the seller under the original bill of lading. However, the situation can become more complex. For instance, if a cargo originally shipped as 10,000 tons under one bill of lading is replaced by ten delivery orders for 1000 tons each, even if the carrier still delivers a total of 10,000 tons, the carrier might be liable to the holder of the final delivery order if they, in fact, delivered 1200 tons instead of the stipulated 1000 tons in one of the other delivery orders. In such cases, only 800 tons would be available for delivery to the holder of the final delivery order, who may then pursue a claim for short delivery.

It’s important to distinguish this type of delivery order from another document also referred to as a ‘delivery order,’ which primarily serves as an instruction from the carrier to a port authority or terminal to release cargo to a party who has demonstrated their entitlement by presenting the original bill of lading to the carrier or its agent.

 

2.0 THE SIGNIFICANCE OF MANDATORY INTERNATIONAL CONVENTIONS

The three international conventions currently in effect and which are specifically designed to be applicable to contractual claims, excluding claims made in tort are as follows:

– The Hague Rules

– The Hague-Visby Rules

– The Hamburg Rules

Although Article 4 bis 1 of the Hague-Visby Rules states that “the defenses and limits of liability provided for in these Rules shall apply in any action against the carrier in respect of loss or damage to goods covered by a contract of carriage,

whether the action is based on contract or tort,” the English Court of Appeal, as demonstrated in the case of The Captain Gregos, has ruled that these Rules only apply when there is a contract of carriage between the claimant and the carrier. Essentially, this means that if there is a contract between the cargo claimant and the carrier, a claim against the carrier must be brought as a contract claim, and the reference to tort claims is of minimal relevance. The conventions specify that any clause in a contract of carriage that attempts to provide greater protection than what is allowed by the conventions will be declared “null and void and of no effect.”

These Rules are not consistently adopted by all countries. Some countries are parties to the Hague Rules, some to the Hague-Visby Rules, and a few to the Hamburg Rules, while some countries are not parties to any of these conventions. Furthermore, even in countries that have adopted a specific convention, the implementation may vary, making it essential to determine which Rules, if any, apply and how they apply.

In broad terms, the carrier’s liability under the Hague and Hague-Visby Rules different from that under the Hamburg Rules in the following ways:

– Under the Hague and Hague-Visby Rules, the carrier is not liable unless the cargo claimant proves that the carrier has breached specific duties, after which the carrier can invoke certain protective rights.

– Under the Hamburg Rules, the carrier is automatically deemed liable for loss or damage to cargo that occurs while the goods are in their custody unless they can prove that they have taken “all measures that could reasonably be required” to care for the goods. However, there are also notable distinctions between the Hague Rules and the Hague-Visby Rules, particularly regarding the availability and extent of package limitation rights.

THE SCOPE OF REGULATION It is crucial to determine whether the Rules apply in a given situation, as their application affects the relationship between the carrier and the cargo interest. If the Rules do not apply, the relationship is governed by freedom of contract principles, but if the Rules apply, certain contract provisions may be invalidated. For instance, Article III Rule 8 of the Hague and Hague-Visby Rules states that any clause in a contract of carriage relieving the carrier or the ship from liability for loss or damage to goods arising from negligence, fault, or failure in the duties and obligations provided in the Rules, or reducing such liability in a manner not provided in the Rules, shall be null and void and of no effect. A similar provision exists in Article 23 of the Hamburg Rules.

THE HAGUE AND HAGUE-VISBY RULES The Hague and Hague-Visby Rules are not universally applicable. For example, they do not apply mandatorily to:

– Contracts other than ‘to order’ or straight bills of lading

– Carrier’s responsibility before loading and after unloading

– Carriage from countries not party to the Rules or bills of lading issued in such countries – Carriage of live animals

– Carriage of deck cargo listed on the bill of lading

In some countries, it is also debatable whether the Rules apply to claims for delays when there is no physical loss or damage. Nevertheless, parties frequently extend the Rules’ application by mutual agreement through a Paramount Clause, such as in charterparties. However, the Rules do not address certain issues, including determining the carrier, eligible parties for cargo loss or damage claims, applicable jurisdiction and law, and the role of a bill of lading as a title document

In contrast, the Hamburg Rules have a broader mandatory scope. They apply compulsorily to:

– All contracts (excluding charterparties) involving freight payment

– Carrier’s responsibility from goods delivery at the loading port to delivery at the discharge port

– Carriage to or from a country party to the Rules – Carriage of live animals and deck cargo

– Claims for delays

– The Hamburg Rules also mandate specific provisions on the jurisdiction where claims can be filed. – Additionally, the Hamburg Rules impose joint and several liability for cargo claims on both the carrier (defined as the party entering into the

CARRIER’S OBLIGATIONS:

• The Hague and Hague-Visby Rules Under the Hague and Hague-Visby Rules, the carrier has several key duties. Article III Rule 1 requires the carrier to exercise due diligence before and at the start of the voyage, ensuring the ship’s seaworthiness, proper manning, equipping, and supplying of the ship, and making holds and other cargo storage areas fit and safe for goods. Notable factors regarding this provision include the inclusion of all carrier’s servants, agents, and independent contractors under “the carrier,” the requirement for due diligence at all times the ship is under the carrier’s control up to the voyage’s commencement, and the necessity of avoiding negligence.

Article III Rule 2 states that, subject to Article IV provisions, the carrier must properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods. This provision involves all carrier’s servants, agents, and independent contractors in “the carrier’s” obligation. The carrier’s duty under this rule extends throughout the time the carrier has the cargo in their care. Under common law, parties may decide which cargo operations each will operations agreed upon.

• The Hamburg Rules

The carrier’s liability under the Hamburg Rules differs significantly from that contract of carriage with the shipper) and the actual carrier (if di erent from the defined carrier). under the Hague or Hague-Visby Rules. Except for the carriage of live animals and deck cargo, Article 5.1 of the Hamburg Rules holds the carrier liable for loss, damage, or delay to goods that occurred while they were in the carrier’s custody. The carrier is liable unless they prove that they, their servants, or agents took all necessary measures to prevent the occurrence and its consequences

Therefore, once the cargo claimant establishes that the cargo was lost, damaged, or delayed while in the carrier’s custody, the carrier is presumed liable, and there is no need for the cargo claimant to prove how the cargo’s loss, damage, or delay occurred or attribute it to carrier negligence, servants, or agents

CARGO DELIVERY RESPONSIBILITIES

The carrier is responsible for ensuring the delivery of cargo at the conclusion of the voyage to the rightful recipient. When considering the application of rules like the Hamburg Rules, they often regulate this duty, governing the transport from the moment the carrier takes possession of the goods from the shipper until the moment they are handed over to the consignee.

However, the Hague and Hague-Visby Rules do not explicitly mention the responsibility of delivering goods; they only apply from the loading of goods onto the ship until their discharge (from tackle to tackle). This distinction is crucial because cargo might be “discharged” when it is placed on the quay but may not be considered “delivered” until it is handed over to the consignee. In certain trades, like the tanker industry, there may not be a significant difference since cargo is often both discharged and delivered when it passes from the ship through the manifold to the shore. However, in container shipping, the container might be discharged into the container receiving yard at the port but not delivered until days later when the consignee arrives to collect it

Even when the rules don’t apply, there’s a long-standing common law principle followed in most countries globally. It stipulates that a carrier should not deliver cargo shipped under a ‘to-order’ or straight bill of lading unless and until the original bills of lading are surrendered to them. This rule exists because the carrier may not know who the rightful recipient is, especially if the bill of lading has changed hands multiple times during the voyage. Consequently, the carrier can deliver the cargo to the party who presents the original document of title. If the carrier delivers without obtaining the original bills of lading, they do so at their own risk, potentially facing:

– Liability to the actual owner for the full value of the misdelivered cargo.

– An inability to rely on exclusion clauses in the bill of lading.

– Jeopardizing their right to limit their liability.

– Loss of P&I (Protection and Indemnity) coverage for liabilities arising from the misdelivery.

Despite this rule, situations arise where original bills of lading aren’t available at the time of delivery. To prevent delays, carriers might deliver cargo without the original bills of lading, provided they receive a letter of indemnity (LOI) from charterers or the party requesting delivery. The International Group P&I Clubs have even produced an LOI form for such situations. However, it’s essential to understand that using these forms is not obligatory, and using them doesn’t necessarily protect the carrier’s P&I coverage for misdelivery liabilities

The obligation to deliver cargo against the surrender of original bills of lading exists because these documents function as titles, creating the aforementioned difficulties. Consequently, when goods are carried under a sea waybill, the carrier doesn’t need to demand the surrender of the original waybill before delivering the cargo since a sea waybill is not a title document. The carrier can deliver based on instructions received from the shipper without requiring proof of the shipper’s entitlement to give those instructions. However, for straight bills of lading that can be transferred, the carrier cannot safely deliver to the named consignee without receiving the original bills of lading since they have no other means to determine the rightful recipient.

Challenges arise because bills of lading traditionally come in sets of three originals, each acting as a title document. Thus, if the carrier delivers cargo against the surrender of less than the full set of original bills, there’s a risk that another party could produce an original bill later and demand delivery of the cargo. However, most bill of lading forms explicitly state that delivery can be made against the production of one original bill, which protects the carrier unless they are informed that another party holds one or more of the other original bills. In light of recent bill of lading frauds, carriers are expected to be cautious and inquire why less than the full set of bills is being surrendered.

CARRIER’S RIGHTS Under

The Hague and Hague-Visby Rules, the carrier can rely on various defenses, many of which are force majeure-related, such as Acts of God or perils of the sea. However, there are two controversial defenses in Article IV Rule 2 that allow the carrier to defend against claims, even when negligence on their part caused the loss or damage. These defenses are

1. Acts, neglect, or defaults of the master, mariner, pilot, or carrier’s employees in the navigation or ship management.
2. Fire, unless caused by the carrier’s actual fault or privity

However, carriers can only use these defenses if they can demonstrate that there was no breach of their overriding duty to exercise due diligence under Article III Rule 1.

• The Hamburg Rules The Hamburg Rules provide fewer defenses compared to the Hague and Hague-Visby Rules. Carriers can only defend themselves if they can prove that they took all reasonable measures to prevent the occurrence and consequences of the damage, as stated in Article 5.1

PACKAGE LIMITATION

Carriers’ primary defense against cargo claims is proving the right to rely on an exception clause. If they can do this, the claim stops there. If they cannot, they may still be able to limit their liability for the claim to an amount less than the actual loss. This limitation can take two forms:

1. Package limitation: Limitation based on the number of packages, units, or weight that have been lost or damaged.
2. Global limitation: Limitation of all eligible claims (including cargo claims) from a single incident based on the ship’s tonnage or value.

Carriers can use both types of limitation if necessary. They typically apply package limitation to individual claims and, if the total claims (after applying package limits) and other eligible claims exceed the limits set by the tonnage limitation convention, individual cargo claims may be further reduced on a pro rata basis. However, unless there are numerous other claims from a significant incident, package limitation is usually the sole remedy for cargo claims

All three sets of rules (Hague, Hague-Visby, and Hamburg Rules) specify that carriers can increase the limitation threshold but cannot reduce it below the figures stipulated in the rules.

Note: It’s important to consult the latest legal sources and seek legal advice when dealing with matters related to cargo transportation and international conventions, as the rules and regulations may have changed since my last knowledge update in September 2021

TIME LIMITS Most countries have a common policy that requires claims to be filed within a specific timeframe; otherwise, these claims become unenforceable. The exact time limits vary from one country to another. However, in the context of cargo claims, the time limit provisions typically align with the Hague, Hague-Visby, or Hamburg Rules

THE HAGUE AND HAGUE-VISBY RULES

Under the Hague and Hague-Visby Rules, claims against the carrier must be initiated within one year from the delivery of the cargo. In cases where the goods are not delivered at all, the one-year period starts from the date they were supposed to be delivered.

Notably, the time limit is not triggered by merely notifying the carrier of a claim; it only begins when court or arbitration proceedings are commenced. As a result, cargo claimants often request an extension of this timeframe, though carriers are not obligated to grant it. They may consider extending the time limit if they believe the claim can be settled without resorting to legal proceedings. Importantly, it’s crucial to note that these Rules impose a one-way time limit, applying exclusively to claims against the carrier, not claims made by the carrier.

For claims by the carrier against cargo interests, such as freight claims, the time limit depends on the governing law of the contract. For instance, if English law governs the bill of lading, cargo claims against the carrier are subject to the one-year time limit stipulated in the Rules, while claims by the carrier against cargo interests have a time limit of six years

THE HAMBURG RULES

The Hamburg Rules differ from the Hague and Hague-Visby Rules in two significant ways: The Hamburg Rules differ from the Hague and Hague-Visby Rules in two significant

– The relevant time limit is extended to two years, rather than one.

– This time limit applies to claims both against and by the carrier, creating a two-way time limit.

 

3.0 MULTIMODAL AND THROUGH TRANSPORT

The current means of transportations is such that cargo can now travel seamlessly from one inland location in one country to another in a different country using various modes of transportation without disturbing the container’s contents. It’s important to differentiate between multimodal transport and through transport:

• Multimodal transport involves a single carrier assuming responsibility for the entire journey from door to door, with goods transported via a combination of different modes (e.g., road, rail, sea).
• Through transport occurs when goods are exclusively carried by sea, involving transshipment at one or more points during the transit. The carrier assumes responsibility only for the first leg of the journey, acting as an agent for onward carriage from the transshipment point.

In the case of multimodal transport, claims can be brought against the carrier for loss or damage at any point during the door-to-door journey. In contrast, for through transport, claims for loss or damage can only be made against the carrier if the incident occurs while the goods are on their vessel. Claims for loss or damage after transshipment are typically directed at the transshipment vessel.

Multimodal transport often delegates responsibility for various parts of the journey to other parties, especially in cases involving non-vessel owning carriers (NVOCs) who handle sea carriage through subcontracting. This arrangement presents several challenges:

– Lack of a comprehensive international convention regulating the entire journey.

– Di erent sectors of transport governed by separate international conventions or local laws.

– Di culty in determining where loss or damage occurred due to sealed containers.

– Sub-contractors facing potential tort claims. To address these issues, many multimodal bills of lading adopt the “network system,” where the liability framework is determined based on the specific mode of transport involved in the loss or damage. If it’s uncertain which mode caused the issue, the bill of lading’s terms come into play.

THE ROTTERDAM RULES

Efforts have been made to replace the current fragmented system of regulating international goods carriage with the UN Convention on Contracts for the Carriage of Goods Wholly or Partly by Sea, also known as the Rotterdam Rules. These rules aim to establish a consistent regulatory framework for all modes of international goods transport, as long as one leg of the journey involves sea transport. Key changes include:

– Repealing the Hague, Hague-Visby, and Hamburg Rules, replacing them with the Rotterdam Rules. – Imposing a duty on carriers to maintain vessel seaworthiness throughout the voyage.

– Eliminating the defense of negligent navigation

. – Applying uniform rules to all transport legs, except where other compulsory international unimodal conventions apply.

– Making the contractual carrier responsible for subcontractors’ actions.

– Holding maritime performing parties jointly and severally liable with the contractual carrier if they provide services during loading, voyage, or unloading.

– Recognizing and regulating electronic contracts of carriage. – Increasing package liability limits.

– Extending the time limit for claims to two years, applying to both claims against and by carriers.

The Rotterdam Rules provide provisions for avoiding certain rules when a contract of carriage qualifies as a “volume contract,” defined as a contract for transporting a specified quantity of goods over a predetermined period.

The Rotterdam Rules also introduce mandatory jurisdictional regulations, which may limit the effectiveness of traditional contractual jurisdiction clauses. However, countries adopting these rules have the option to exclude this provision.

4.0 LIABILITY IN TORT

The absence of a contractual connection between the cargo owner and the party responsible for damage or loss doesn’t absolve the latter from liability. In most legal systems worldwide, there exists a fundamental principle that obliges individuals to exercise care and prevent harm or loss to another person’s property. Consequently, if the cargo owner can establish that negligence by a non-contractual carrier caused the damage or loss, they may have the right to file a tort claim against that party. Notably, since this party is not a signatory to the contract of carriage between the cargo owner and the primary carrier, they may not be able to rely on any exemption clause within that contract, even if it was designed to protect them.

 

LIABILITY IN TORT GENERALLY ARISES IN TWO SCENARIOS

1. When the contractual carrier is not the shipowner (e.g., a charterer or freight forwarder) and the carriage is delegated to a shipowner who incurs losses or damage to the cargo during transport.
2. When the loss or damage to the cargo is caused by a subcontractor of the carrier (e.g., a stevedore). Tort claims may present a more attractive option for a cargo claimant when the bill of lading’s carrier is the charterer or non-vessel-operating common carrier (NVOCC), and it can be proven that the shipowner is responsible for the damage during transport. In such cases, the cargo claimant may choose to pursue legal action against the shipowner and potentially arrest the ship as collateral for their claim. This strategy might become even more appealing if there are doubts regarding the financial stability of the contractual carrier.

However, a tort claim can only be brought by the party entitled to possess the cargo at the time of the negligence occurrence. Therefore, a tort claim may not always be feasible. For instance, if cargo is shipped by A on Monday, damaged on Wednesday, and sold to B on Thursday, B cannot file a tort claim against the shipowner if they discover the damage when taking delivery on Saturday. A, as the possessor on Wednesday, would have the right to initiate such a claim. Nonetheless, if A has already received full payment from B on Thursday and has no interest in pursuing such a claim, B’s only recourse would be the contractual claim against the carrier as stipulated in the bill of lading.

 

PROTECTION OF THIRD PARTIES: In modern systems, transportation is far more intricate and often involves subcontracting to various entities, which means it is no longer limited to port-to-port shipments involving just two parties – the carrier and the cargo owner. For instance, shipowners now frequently employ specialized stevedores for loading and unloading cargo. Additionally, multimodal transport involves a carrier taking responsibility for moving cargo between different inland locations via land, sea, or air, with different phases of transportation delegated to other parties. Consequently, cargo may be lost or damaged while in the custody of a subcontractor, potentially exposing them to tort claims from the cargo owner.

The industry acknowledges the need to protect such third parties, although there is currently no international convention providing such protection in force. Some countries’ domestic laws do offer such protection (e.g., the Contracts (Rights of Third Parties) Act 1999 in the UK), but these laws only apply if the dispute falls under the jurisdiction of that country. Therefore, the industry has devised its own means of protection through the inclusion of standard clauses in bills of lading. The primary clauses include

1. The Himalaya Clause: This clause specifies that the contractual carrier enters into the bill of lading not only for their benefit but also as an agent for subcontractors. This creates a contractual relationship between the cargo owner and the subcontractor, allowing the latter to utilize various defenses mentioned in the bill of lading.
2. The Circular Indemnity Clause: Under this clause, the cargo owner commits not to bring claims against anyone other than the contractual carrier and pledges to indemnify the carrier if this commitment is breached.

Additionally, recent developments have allowed a third party to potentially rely on either the terms of contracts between the contractual carrier and the cargo owner or their own standard business terms for protection, based on the doctrine of bailment. Bailment is a legal concept where a person who voluntarily accepts possession of another’s property (the bailee) is responsible for taking care of it, even without a formal contract, and must return it to the owner (the bailor) in the same condition. The bailee can, before taking possession of the property, notify the bailor that they will do so under specific terms that can protect them against liability. If the bailor subsequently delivers the property to the bailee, it’s deemed that they have accepted these terms and that the bailee can rely on them for protection in case of loss or damage while in their possession.

Therefore, a bailment arises when goods are voluntarily accepted by a subcontractor based on a contract between the carrier and the cargo owner. However, if the contract between the carrier and the cargo owner indicates that the goods may be carried by a third party under different terms, the cargo owner may be considered as having accepted those terms if they subsequently allow their goods to be transported in accordance with those arrangements. In such situations, the cargo owner is aware that a third party involved in the transportation will rely on these terms for protection and has consented to this possibility. However, bailment is a complex legal concept, and parties involved should seek legal advice for further clarification.

INDEMNITY CLAIMS UNDER CHARTERPARTIES

When claims are filed under bills of lading issued as part of a charterparty, the carriers under the bills of lading (whether shipowners or charterers) may seek indemnity from the other party to the charterparty if they are found liable to the cargo claimant. The eligibility and strength of such indemnity claims depend on the terms of the charterparty and the causes of cargo damage or loss.

In most cases, if the liability the carrier faces under the bills of lading is greater than what they would have faced if the same claim had been brought under the charterparty, they are entitled to an indemnity from their contracting partner under the charterparty for the additional liability they incur under the bill of lading.

However, the situation becomes more complicated if the cargo claim arises due to neglect in caring for the cargo during transit. Negligence in cargo care is typically attributed to the crew, and hence, the shipowner, which is similar to the scenario concerning unseaworthiness. Yet, if the cargo claim relates to damage occurring during loading, stowage, or discharging of the cargo, the responsibilities of shipowners and charterers depend on the agreed terms for these cargo operations. For instance, if the parties have agreed to Free In/Out (FIOS) terms, the charterers assume responsibility for these operations

 

Consequently, if the shipowner is liable as the carrier under the bills of lading for such claims, they may be entitled to claim indemnity from the charterers, while the charterers, if they are the carriers under the bills of lading, do not have the right to claim indemnity from the shipowners.

The rights of shipowners and charterers to claim indemnities among themselves under dry cargo time charters for losses or damage caused by cargo handling are notably complex. To address this complexity, the industry has established a special system for regulating such claims, particularly under the New York Produce Exchange 1946 and 93 forms of time charter. This system is known as the Inter-Club New York Produce Exchange Agreement (ICA), and it provides a general framework for allocating responsibility between shipowners and time charterers for various types of claims.

Originally, the ICA was an agreement among Protection and Indemnity (P&I) clubs to recommend the settlement of indemnity claims based on its terms. However, it has become common for the ICA to be directly included in dry cargo time charters as a binding term. The ICA has evolved over the years, with the current version being that of 1996, further amended in September 2011. The agreement outlines the apportionment of cargo claims in a “rough and ready” manner:

1. Claims arising from the vessel’s unseaworthiness or navigational errors or faults are borne entirely by shipowners, unless they can demonstrate that cargo handling (e.g., loading, stowage, lashing, discharge) caused the unseaworthiness, in which case the claim is apportioned as per sub-clause (b).
2. Claims arising from cargo handling are typically borne entirely by charterers, except when specific amendments or responsibilities for cargo handling are added to the charter, in which case the apportionment becomes 50 percent charterers and 50 percent shipowners, unless charterers can prove that unseaworthiness caused the improper cargo handling, leading to shipowners bearing full liability.
3. Claims related to shortages or overcarriage are divided equally between charterers and shipowners, unless clear evidence shows that the claim resulted from pilferage or the acts or neglect of one party or the other (including their employees or subcontractors). In such cases, the responsible party bears full liability.
4. All other cargo claims, including those for delay, are typically shared equally between charterers and shipowners, unless clear evidence shows that the claim resulted from the acts or neglect of one party or the other (including their employees or subcontractors), in which case that party bears full liability.

The ICA 1996 as amended, introduced a provision allowing a party obligated to provide security for a cargo claim brought by a third party to demand security in an acceptable form from their contracting partner under the charterparty if the requesting party can also provide security in an acceptable form, and for an equivalent amount to the other party under the principle of reciprocity.

 

5.0 THE SIGNIFICANCE OF PROVIDING PROOF

Pursuing a claim can be a challenging endeavor without substantiating evidence. In the absence of such evidence, it becomes impossible to determine the cause behind a loss or damage. Typically, three sources of evidence come into play:

1. Carrier Source Evidence
2. Cargo Source Evidence 3. Survey Evidence

The mere occurrence of cargo loss or damage during transit doesn’t automatically grant the cargo owner the right to seek compensation from another party. In certain cases, the responsibility for the loss may rest with the cargo owner, meaning they must bear the loss themselves. Therefore, if the cargo owner intends to establish another party’s liability, they must first identify the cause of the loss or damage and then demonstrate their entitlement to indemnification from that party.

Typically, a claimant seeks to establish the cause of loss or damage for specific contractual purposes, including the contract of sale, the contract of carriage, and/or the contract of insurance. The conditions under which these contracts grant the claimant recovery rights differ. Therefore, evidence is crucial in determining which contract, if any, entitles the claimant to indemnification. For instance:

– If cargo damage results from inherent vice, there is usually no right to recover under the contract of carriage or the cargo insurance contract, but there might be a right of recovery under the contract of sale.

– If cargo damage arises from the unseaworthiness of the ship, there is usually no right to recover under the contract of sale, but there will be a right of recovery under the contract of insurance and/or the contract of carriage.

– If cargo damage occurs due to a collision, there is normally no right to recover under the contract of sale or the contract of carriage, but there will be a right of recovery under the contract of insurance.

– If the cargo is not damaged but is found to be of inferior quality, there is typically no right to recover under the contract of carriage or the contract of insurance, but there may be a right of recovery under the contract of sale

The need for evidence is paramount for both the claimant and the respondent. It’s essential for the claimant to prove that the loss or damage resulted from an event for which the respondent is responsible. Similarly, the respondent may need to rely on contract terms or international conventions to defend against liability. Therefore, evidence is of utmost importance, and vigilance is necessary to monitor and document the entire cargo journey from its origin to its final destination. Failing to do so can significantly impact the validity of a claim or a defense against a claim.

• CARRIER SOURCE EVIDENCE:

Carrier source evidence pertains to both the cargo and the ship.

Specifically, Evidence of Cargo involves the carrier’s inspection of the cargo’s quantity and apparent condition upon receipt. This information is typically documented in records like the mate’s receipt or the cargo manifest. Once loading is complete, this recorded information is transferred to formal documents, such as the bill of lading or sea waybill. These documents serve as formal receipts, benefiting not only the shipper but also subsequent recipients of the documents who were not present during the cargo’s shipment and rely on the accuracy of the carrier’s receipt.

A bill of lading or sea waybill typically records (i)the date and place of shipment of goods, (ii)the weight or quantity of the goods, and (iii)the apparent order and condition of the goods.

The quality of the goods refers to their inherent or natural state when produced, whereas the condition indicates whether the goods have been damaged post-production. The bill of lading or sea waybill records the latter and not the former. This distinction is crucial, as the quality of the goods matters in the contract of sale but not in the contract of carriage or cargo insurance.

As the bill of lading or sea waybill only reflects the visible condition of the goods at the time of shipment, it doesn’t provide meaningful evidence of the goods’ condition within packaging, especially in trades like container shipping. The ship’s crew is responsible for noting visible features and making judgments about potential damage as reasonable seafarers. If they believe the goods are damaged, they should include a clause on the bill to notify subsequent recipients that the damage existed before shipment, protecting the carrier’s interests

However, carriers must exercise caution when including such clauses, as they may affect the shipper’s ability to receive payment under the contract of sale or accompanying letter of credit. Additionally, various rules and practices govern the acceptability of bills of lading in financial transactions, such as the ICC Uniform Customs and Practice for Documentary Credits (UCP 600).

Regarding the quantity or weight of the goods, there are instances, particularly in bulk cargo shipments, where it’s challenging to determine the exact amount shipped. Under the Hague and Hague-Visby Rules, carriers can sign bills of lading for the quantity or weight provided in writing by the shipper. The shipper is considered to guarantee the accuracy of these figures and may need to indemnify the carrier if they’re inaccurate. However, if the carrier issues the bill based on figures they suspect to be inaccurate, they may have to settle a claim from a recipient of the bill before seeking indemnity from the shipper. Additionally, if the carrier knowingly accepts inaccurate figures, they risk losing their insurance coverage.

To address these situations, carriers have several options: 1. Issue the bill based on the shipper’s figures and seek indemnity if discrepancies arise, while also issuing a note of protest to express doubts about the figures.

1. Issue the bill based on the shipper’s figures and seek indemnity if discrepancies arise, while also issuing a note of protest to express doubts about the figures.
2. Include the ship’s figures alongside the shipper’s figures on the bill to notify recipients of the carrier’s reservations
3. Refuse to sign the bill if there are reasonable grounds to suspect inaccuracies, though this may only delay the issuance of the bill.
4. Rely on general protective clauses like ‘weight unknown’ or ‘quantity unknown,’ commonly found in bill of lading forms. However, it’s important to note that under The Hamburg Rules, some of these alternatives may not be available to carriers.

• The Evidentiary Significance of Documents When it is established that goods were initially shipped in apparent good condition but were ultimately received in a damaged state, or if there is a discrepancy between the delivered cargo and the quantity or weight documented on the bills of lading or sea waybill, there arises a presumption that the damage or loss occurred during the voyage. The responsibility then shifts to the carrier to demonstrate the cause of the loss or damage and to establish a valid defense

This underscores the importance of bills of lading and sea waybills as crucial pieces of evidence. As long as these documents remain in the possession of the shipper, they do not serve as definitive proof of the accuracy of the goods’ condition, quantity, or weight. In the event of a claim by the shipper, the carrier has the right to refer to alternative sources of evidence, such as mate’s receipts, to challenge the data’s accuracy. However, once the shipper transfers the bill of lading to another party, it becomes conclusive evidence of the stated data, and the carrier cannot introduce additional evidence to dispute it. This highlights the significance of ensuring the accuracy of the information contained in these documents

For instance, if the bill of lading indicates a greater quantity than was actually shipped, the receiver can potentially claim compensation from the carrier for the cargo that was seemingly short-delivered but was never loaded onto the ship (referred to as a ‘paper shortage’). In such cases, the carrier may seek indemnity from the shipper or charterers (if they presented the bills) since they are considered to have guaranteed the accuracy of the quantity or weight they provided

The chances of a successful indemnity claim may be enhanced if the carrier issued a notice of protest when releasing the bill of lading. However, in cases where the bill of lading or sea waybill includes terms like ‘weight unknown’ or ‘quantity unknown,’ some common law countries consider these documents as insufficient evidence of the quantity or weight shipped, necessitating reference to other evidence sources like mate’s receipts or shore tallies

It’s worth noting that not all countries follow the same rule, and in many jurisdictions, the inclusion of such terms does not diminish the evidentiary value of the bill of lading or sea waybill.

• Evidence of the Vessel In most cases, investigating the cause of loss or damage involves assessing the physical condition of the vessel or other carriers used for transporting goods and evaluating the conduct of the crew and other personnel employed by the carrier. This investigation typically requires a review of records maintained by the carrier. In many instances, the burden of proof falls on the carrier to establish the cause of the loss or damage and demonstrate a valid defense. Therefore, evidence pertaining to the vessel and the crew’s conduct holds significant importance.

Several international conventions require ships to maintain specific records, including deck and engine logbooks, oil record books, pump-room log books, tank cleaning record books, loading plans, stability calculations, fire equipment records, and SMS checklists (in accordance with the ISM Code). The ISM Code also mandates the implementation of a safety management system and the maintenance of paper records on the ship and ashore to monitor compliance with the Code’s requirements. It further necessitates the appointment of a designated person with the authority to rectify deficiencies. Failure to maintain such records may be viewed as a lack of due diligence by the company

Similarly, employers of crew and personnel on road and rail carriers must maintain records related to qualifications and periodic assessments to demonstrate the exercise of due diligence.

• CARGO SOURCE EVIDENCE:

Most international cargo sales agreements oblige the seller to provide various documents concerning the quantity, quality, and origin of the cargo. Independent cargo inspectors typically produce these documents, including certificates of quality, certificates of origin, and certificates of quantity or weight. In bulk cargo shipments, it is common to take samples before, during, and after loading, with sampling certificates attesting to the sampling process and sample sealing. This practice is especially crucial in the liquid bulk trade, where claims of products being ‘off-specification’ upon discharge are not uncommon. In such cases, identifying the cause of the problem is essential.

Samples should always be properly collected, sealed, and retained by the vessel until it is evident that they are no longer required, as cargo claims can take a considerable amount of time to materialize

• SURVEY EVIDENCE:

The documents and records discussed in previous sections primarily pertain to the initial condition and shipment of goods

However, in cases where loss or damage results from subsequent events, evidence is needed to ascertain the nature, cause, and extent of the loss or damage. To address this, surveyors, naval architects, cargo quality inspectors, accountants, or other experts may be appointed to provide expert insights and opinions. It is crucial to assume that every fact or assertion may require substantiation for a claim or defense to be successful.

DISCLOSURE OF EVIDE

The laws of most countries require parties involved in litigation to make available all relevant documents and records related to the dispute. The extent of disclosure varies by country, and legal guidance should be sought based on the jurisdiction where the claim is being litigated.

While parties often hesitate to disclose evidence that could harm their case, many countries’ laws mandate the disclosure of such documents, along with those that support the claim. For instance, in the UK’s Rules of the Supreme Court, litigants are required to disclose documents that they rely on and those that may adversely affect their own or another party’s case or support another party’s case. However, exceptions may apply to survey reports and documents commissioned by or on behalf of legal advisors to aid in prosecuting or defending a claim, as these may be protected by legal privilege and exempt from disclosure. Other documents, survey reports, samples, and records created in the ordinary course of carriage and trade, not for the purpose of litigation, must be disclosed.

6.0 LAW AND JURISDICTION

In cases where the claim is subject to the Hamburg Rules, claimants are given the option to file their claims in one of five different countries, including the one where the cargo was unloaded. This choice is entirely unrestricted, even if the bill of lading attempts to impose an exclusive jurisdiction clause. Consequently, this choice offers claimants a significant advantage in litigation, and this advantage remains valid under the Rotterdam Rules, provided that the relevant country ratifies the Rules’ law and jurisdiction provisions.

The Hague and the Hague-Visby Rules do not include provisions regarding jurisdiction, but these Rules are adopted by a considerable number of countries with maritime interests worldwide. Nevertheless, the governing law and jurisdiction clauses in the contract of carriage hold great importance, as these conventions are not implemented consistently across all nations. Hence, the governing law and jurisdiction can profoundly impact the merits of cargo claims.

It’s essential to recognize that even if a contract of carriage includes an explicit law and jurisdiction clause, the laws of many countries may allow their courts to maintain jurisdiction even when there is a conflicting jurisdiction clause. Moreover, most maritime nations permit the arrest of ships within their territorial limits for the purpose of obtaining security.

Consequently, a vessel may be seized in country A as security for a claim to be litigated in country B. If security is provided, the courts in country A may then suspend further proceedings to allow the claim’s merits to be adjudicated in country B.

7.0 INSURANCE

Typically, a cargo claimant will initially file a claim under the relevant cargo insurance. In most cases, this insurance covers physical loss or damage to the cargo (excluding losses solely due to cargo delay) and the cargo’s share of salvage or general average. In such instances, cargo insurers are subrogated to the rights of the insured to bring a claim in contract or tort against the carrier or the party responsible for the loss or damage. Therefore, in most cases, the claim against the carrier or responsible party will be initiated by cargo insurers, either in their own name or on behalf of the insured, depending on the jurisdiction.

The liability of the carrier or the party responsible for the loss or damage is typically covered by standard P&I insurance, offered either through the International Group P&I clubs on a mutual basis or by other market insurers with fixed premiums. However, both types of coverage have numerous specific exclusions. For instance, standard P&I coverage does not extend to liabilities arising from cargo delivery without the surrender of original bills of lading, and it imposes a limit of USD 2,500 per unit, package, or piece for claims arising under ad valorem bills of lading. Additionally, the member clubs of the International Group of P&I Clubs provide coverage for liabilities arising under the Hamburg Rules or Rotterdam Rules when these Rules are mandatory, but not when voluntarily adopted by the carrier. Therefore, shipowners must have a clear understanding of the available coverage in such circumstances. In case of an actual or suspected claim, shipowners should promptly inform their liability insurers and collaborate closely with them to defend against the claim. Failing to do so may jeopardize the shipowners’ right to be indemnified by their insurers for any future payments to cargo claimants

It’s crucial to note that a cargo claimant typically cannot directly pursue a claim against a liability insurer. The coverage provided by the member clubs of the International Group of P&I Clubs operates on a ‘pay to be paid’ basis, meaning that the shipowner must first settle the claim and then seek reimbursement from the club. Furthermore, even if coverage is available, the club is not obligated to offer security to prevent a ship’s arrest or to release a detained vessel. If the club chooses to provide such security, it does so as a service to its members and subject to mutually agreed terms

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LGC Full Course Compendium of maritime Claims Brochure LECTURE 7