Limitations

International Conventions

The carriage of goods by sea is `commonly governed by the Hague-Visby rules.  The Hague-Visby rules and their more modern substitutes, the Hamburg and Rotterdam Rules emerged in the context of the carriers’ power to dictate the terms and conditions of carriage.  Until the beginning of the 20th century, carriers could impose almost any terms they wanted, thereby typically minimising or excluding their liability.

The desirability of common international principles in maritime transport led to the Brussels Convention of 1924. That Convention adopted uniform rules for bills of lading, known as the Hague Rules.  The rules were amended in 1968 by the Visby Rules, and the two Conventions provide a single series of rules known as The Hague-Visby Rules. They provide for the rights and duties of the parties under contracts for the carriage of goods by sea covered by bills of lading.

The United Nations International Convention on the Carriage of Goods by Sea was adopted in Hamburg in 1978.The Hamburg Rules, which were intended to replace the Hague-Visby Rules, have not been ratified by the major maritime states, notwithstanding that there has been dissatisfaction with aspects of the Hague-Visby Rules.

The United Nations Convention on contracts for the international carriage of goods wholly or partly by sea (2008) creates new provisions for the carriage of goods, with a maritime element. These are the Rotterdam rules. It is not clear whether the Convention rules will achieve sufficient support to supplant the Hague-Visby rules.


Application in Irish Law

The Hague-Visby Rules 1968 were incorporated into Irish law by the Merchant Shipping Act.  They were most recently continued by the Merchant Shipping (Liability of Ship Owners and Others) Act 1996. The rules apply to contracts of carriage covered by a bill of lading or by a similar document of title.

There must be a negotiable document.  The contract must relate to the carriage of goods between ports in different states. It must have a connection with the State, by reason of the issues of the bill of lading in the State or the carriage from a port in a state, a party to the Convention.  Alternatively, it may apply because the contract provides that the rules are to apply to it by its terms.


Excepted Risks

The Hague Visby Rules set out excepted perils or risks.  Loss and damage from these risks are not the responsibility of the carrier.  They include perils of the sea, which arise without the fault of any party. They include acts of God, acts of war, act of public enemies, inherent vice of the goods, strikes and lockouts.  They include the exposure of the ship and cargo to a danger which necessitates extraordinary sacrifice by one or other for common safety, e.g. the jettison of cargo in a storm. In these events, the loss falls on all parties in proportion to their respective interests under general average.

There is a narrow exclusion for liability for defects of the master or crew in the navigation or management of the ship.  It is not included in the Hamburg Rules.  Errors in navigation and management are excluded. The carrier may not be entitled to rely on the exemption if fails to provide a seaworthy ship.  In certain other cases, such as collisions where third party fault is involved and so-called both-to-blame clauses mitigate this position to some extent.

Purported exclusions or limitations of the liability imposed by the Hague-Visby rules are void, except in relation to damage or loss before loading and after discharge or otherwise allowed under the rules.  The carrier may undertake additional liability.  It may impose a higher ceiling on its liability, than under the rules.  A lower limit may not be provided.


Hague Visby Limitations on Liability I

The Hague-Visby rules provide that unless the nature and value of the goods have been declared before shipment and inserted in the bill, neither the carrier nor the ship is to be liable for the loss of damage to or in connection with the goods exceeding 666.7 SDR units of account for package, or two units of account per kilogram of gross weight lost or damaged, whichever is higher.

Where a container, pallet or other article is used to consolidate goods, the number of packages or units stated in the bill of lading to be packed in such article of transport, is deemed the number of packages or units, for the purpose of the Hague-Visby rules. As far as the package or units are concerned, the article of transport is regarded as the package or unit.

If the bill of lading refers to one container, the container is the package.  If it refers to one container containing 40 packages, each package has a separate limit of liability unless the bill of lading makes it clear how many units there are.  They may only be deemed to be one unit per container.


Hague Visby Limitations on Liability II

The Hague-Visby Rules provides that “Where a container, pallet or similar article of transport is used to consolidate goods, the number of packages or units enumerated in the bill of lading as packed in such article of transport shall be deemed the number of packages or units for the purpose of the rules as far as these packages or units are concerned.

The limitations on liability do not apply where the loss flows from the act or omission of the carrier done intentionally or recklessly, or with the knowledge that damage would probably result.

The carrier and ship are relieved from liability unless legal action is taken within one year of the delivery date or the due delivery date.  This may be later extended.


Effect of Bill in Claims

The signature of the bill of lading showing shipment or receipt is presumptive evidence in favour of a shipper and conclusive in favour of the transferee (consignee / endorsee), in relation to the

  • the time, fact and place of shipment;
  • leading marks, number, quantity or weight and
  • the apparent order and condition of the good.

The bill must show the apparent good order and condition of the goods.  This is limited to the external appearance and not their internal condition.  Therefore, if the goods are damaged otherwise, the person claiming such as the consignee or shipper, must prove that the damage occurred while they were in the carrier’s possession.

The carrier’s right to rely on the exceptions is not available if it did not exercise due diligence to render the ship seaworthy.  The shipper may prove that the damage occurred while the goods were in carrier’s possession. Thy carrier may, in turn, may be able to show that the seaworthy exemptions apply.


Applying The Convention

In the recent (2017) Maersk Tangier case, the court considered package limitation for containerised cargoes under the Hague-Visby Rules. The Court gave further guidance on what constitutes a “unit” in the Hague and Hague-Visby Rules. The claim arose out of damage to a cargo of large unpackaged pieces of tuna stuffed in three refrigerated containers, during carriage by the Defendant container line.

The contracts of carriage initially contemplated the issue of bills of lading, but that after delays during carriage the parties agreed that waybills would be issued instead, to prevent further delays at the discharge port. The carrier argued that because waybills had been issued, the Hague-Visby Rules did not apply.

The Claimant successfully argued that the Hague-Visby Rules nevertheless had the force of law in relation to the contracts of carriage. The question is not whether a bill of lading is actually issued, but whether the issue of a bill is contemplated under the terms of the contract:

The Judge accepted the Claimant’s argument that the Hague-Visby Rules could apply not only where no bill of lading or other carriage document was issued, but also where a waybill was issued in place of a bill of lading. In such a case, the contract was ‘covered by a bill of lading’ for the purposes of Article I(b).


Statutory Limit

The carrier argued that the individual tuna pieces could not be said to constitute ‘units’, because they could not have been shipped breakbulk without further packaging. Each piece was approximately 20 to 70 kg, and unpackaged. In The Aqasia [2016] 2 Lloyd’s Rep 510, Sir Jeremy Cooke recently held that ‘unit’ meant ‘a physical unit for shipment’ such that there were no ‘units’ in a bulk cargo. But that did not address what was required for a physical item to constitute ‘a physical unit for shipment’.

Not all physical items will constitute ‘units’: in Bekol B.V. v. Terracina Shipping Corporation (‘The Jamie’) (unreported, 13 July 1988), Leggatt J had held that individual pieces of timber would have constituted ‘units’ had they not been bundled up together for shipment. The bundling up of the pieces had the effect of constituting the bundles as ‘packages’, and preventing each piece constituting a unit. Some consideration of the actual packaging of the cargo is therefore necessary to establish whether a particular item of cargo is a ‘unit’.

The Judge held that the only relevant question is whether the individual physical items have been packaged together. If so, the individual items are not units, but instead form part of a single package. If not, each physical item is a ‘unit’. Containers will not constitute a ‘package’, in light of the decision of the Court of Appeal in The River Gurara [1998] 1 Lloyd’s Rep. 225. On the facts of The Maersk Tangier, the individual pieces of ‘tuna’ were therefore ‘units’.


Number of Units

Article IV.5(c) of the Hague-Visby Rules provides that “Where a container, pallet or similar article of transport is used to consolidate goods, the number of packages or units enumerated in the bill of lading as packed in such article of transport shall be deemed the number of packages or units for the purpose of this paragraph as far as these packages or units are concerned.”?

The Judge held that Article IV.5(c) does not require enumeration of the cargo “as packed”. It merely requires that the number of packages or units inside the container is accurately stated in the bill of lading. In this case, the waybills stated that the containers contained a certain number of pieces of tuna. Each piece of tuna was in fact a ‘unit’. The waybills therefore accurately enumerated the number of units in the containers.

The Judge held that the package / unit limit applies to each individual package. As such, if the limit is £100 per package and there are two packages in the container, of which one suffers £500 of damage and the other suffers £1 of damage, the claim overall will be limited to £101 (not £200).


References and Sources

Consumer Law  Long      2004

The Law of Transport and Road Haulage (1999) Canny

Consumer Law Rights & Regulation          Donnelly & White 2014

Commercial Law White  2nd ed    2012

Commercial & Economic Law in Ireland  White    2011

Commercial Law Forde  3rd ed    2005

UK Texts

Schmitthoff: The Law and Practice of International Trade 13th ed Carole Murray, David Holloway, Daren Timson-Hunt, Schmitthoffs 2018

Bills of Lading in Export Trade 4th ed Charles Debattista 2018

Arnould’s Law of Marine Insurance and Average 19th ed  Jonathan Gilman, Robert Merkin, Claire Blanchard, Mark Templeman 2018

O’May on Marine Insurance 2nd Ed Julian Hill 2018

Shipping Law 3rd ed  Sweet & Maxwell Ltd 2018

The UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea 2nd ed Michael Sturley, Tomotaka Fujita, Gertjan van der Ziel 2018

Commercial Maritime Law Edited by: Melis Ozdel 2018

Springer-VerlagScrutton on Charterparties and Bills of Lading 23rd ed: 1st Supplement

Scrutton on Charterparties and Bills of Lading 23rd ed: 1st Supplement (Book & eBook Pack) Scrutton on Charterparties and Bills of Lading 23rd ed: 1st Supplement (Book & eBook Pack)

Bernard Eder, Howard Bennett, Steven Berry, David Foxton, Christopher Smith 2017

The Bill of Lading: Holder Rights and Liabilities The Bill of Lading: Holder Rights and Liabilities

Frank Stevens 2017

Charterparties: Law, Practice and Emerging Legal Issues Edited by: Baris Soyer, Andrew Tettenborn 2017

Shipping and Trade Law 2017

Multimodal Transport Law Michiel Spanjaart 2017

Maritime Law 4th ed Edited by: Yvonne Baatz 2017

The Merchant Shipping (Liability of Shipowners and Others) Act, 1996.