In this briefing, we consider some recent decisions covering when a carriers’ responsibility for cargo ends under the Hague Rules, whether internal risk management systems are the same as external hedging arrangements when considering quantum of loss, and the distinction between the Hague Rules and the Hague Visby Rules when considering time bar.
M/V Maersk Chennai: Carrier’s liability for cargo under the Hague Rules
JB Cocoa Sdn Bhd and Others v Maersk Line AS [05.09.23]
This case is a welcome reminder of some well-established principles relating to contractual interpretation and the temporal extent of carrier’s liability for cargo pursuant to the Hague Rules.
A cargo of containerised cocoa beans was carried on board the M/V Maersk Chennai from Lagos, Nigeria, to Tanjung Pelepas, Malaysia. The cargo was discharged by 1 October 2017 but was not collected until around 28 November 2017, when it was found to be suffering from condensation and mould damage.
The Court found that the cocoa beans were damaged by prolonged containerisation of the cargo between discharge and devanning at Tanjung Pelepas. The cocoa beans were not found to suffer from inherent vice.
Cargo interests pursued a claim against the carrier in respect of this loss. It was held that the carrier’s responsibility for the beans under the Hague Rules, which applied only as a matter of contract, ended upon discharge from the vessel, and therefore this claim was dismissed.
Internal risk management systems subject to the scrutiny of the court when assessing damages
Rhine Shipping DMCC v Vitol SA [26.05.23]
In this commercial court decision, the court was asked to consider whether internal risk management systems were the same as external hedging arrangement when considering quantum of loss.
The case concerned a dispute arising out of a contract between the claimant disponent owner, Rhine and the defendant voyage charterer, Vitol, regarding a delivery of crude oil at Djeno, Congo. The vessel was delayed in Ghana due to an arrest which resulted in her being detained for some days until security was posted.
Vitol claimed that during the delay in Ghana, there was a substantial increase in the price under the purchase contract. Vitol sought to recover the difference in price.
In the course of the proceedings, the Court was asked to consider two key quantum questions:
- The role of Vitol’s internal risk management as a method of calculating loss.
- Whether the loss was within the reasonable contemplation of the parties?
The Court held that that as the internal arrangements did not affect Vitol’s loss, their risk management system was not equivalent to external hedge and that the loss claimed was reasonably within the contemplation of the parties at the time of contracting.
The Court of Appeal confirms time bar in Hague-Visby Rules applies to claims in relation to misdelivery after discharge
FIMBank plc v KCH Shipping Co Ltd [24.05.23] (The GIANT ACE)
This case concerns an appeal under section 69 of the Arbitration Act 1996 relating to a cargo of non-coking steam coal which was shipped on board the vessel "GIANT ACE" in Indonesia and discharged in India against letters of indemnity.
In arbitration, a claim was made for misdelivery by FIMBank against KCH, the contractual carrier under the bills of lading and the demise charterer. The cargo was sold on to various sub-buyers but FIMBank did not receive payment for the cargo. KCH successfully argued that the claim was time barred pursuant the Hague-Visby Rules article III rule 6, which were incorporated into the bills, because the arbitration had been commenced more than one year after discharge.
FIMBank obtained permission to appeal this point of law on the basis that the time bar did not apply to a claim for misdelivery following discharge.
The Court dismissed this appeal and made a distinction between the application of the Hague Rules and the Hague Visby Rules:
- The Hague Rules only provided for carriage by sea, which ended on discharge. The Hague Rules did not apply to misdelivery of cargo stored on land after discharge.
- However, the language used the Hague-Visby Rules which states “all liability whatsoever in respect of the goods” is notably wider than that in the Hague Rules. The Court found that the drafters plainly intended that the limit should apply to misdelivery even occurring after discharge.
Contact: Sara Askew