Bills of lading: “Hague Rules as enacted” can mean the Hague-Visby Rules

Yemgas Fzco and others v Superior Pescadores S.A. [24.02.16]

Date published

11/08/2016

Sectors

Locations

The Court of Appeal has held that where a bill of lading incorporates the Hague Rules as enacted in the country of shipment and that country has enacted what are known as the Hague-Visby Rules, the Hague-Visby Rules apply.

Background

Project machinery and equipment was carried from Antwerp, Belgium to Balhaf, Yemen under six bills of lading, each containing a clause paramount incorporating the Hague Rules 1924 (HR) “as enacted in the country of shipment”. Belgium applies the Hague-Visby Rules (HVR).

Unlike many other forms of clause paramount, there was no reference to trades in which the HVR apply. The cargo was damaged on the voyage, causing loss in excess of US$3.6 million. By agreement, the cargo owners’ claim was made subject to English law and jurisdiction. 

Under the HVR, package limitation meant the claim was worth around US$400,000, which the carrier paid. However, for some parts of the cargo there would have been higher package limits under the HR, so to the extent that the HR limit was higher than the HVR limit, cargo interests argued the contractual application of the HR enabled them to claim the higher sum, which would permit recovery of an additional US$200,000.

At first instance, Mr Justice Males held that previous authority compelled the conclusion that the clause paramount incorporated the HR, not the HVR, but that this did not amount to an agreement that the higher sums could not be claimed. The cargo owners appealed.

Decision

The Court of Appeal disagreed with Males J, holding that the previous authorities did not in fact compel a conclusion that the HR applied. Lord Justice Tomlinson corrected any misconception to the contrary based on his decision in The Happy Ranger [2002]. The HR, as amended by the 1968 Visby Protocol, were never promulgated as a single autonomous instrument, so the phrase “the Hague Rules as enacted in the country of shipment” must, where the relevant country applies the HVR, mean the HVR. 

Since English law was agreed to apply, the question was governed by the schedule to the Carriage of Goods by Sea Act 1971. This enactment refers to the HR “as amended”. The amendment is the HVR. So the HVR applied. They applied with the force of law because Belgium was a contracting party. The appeal was accordingly dismissed.

Implications

Package limitation is a key element of all cargo claims. Parties want to know where they stand on this at the outset. To an extent this decision therefore provides owners, charterers and traders with additional certainty over the liability regime which will apply.  

Most modern form bills of lading (for example the 1994 or 2007 Congenbill) allow for the mandatory application of the HVR where the bill is issued in a contracting state and/or where cargo is shipped from a contracting state, but apply the HR as enacted in the country of shipment otherwise, thereby potentially creating a gap, which this decision now closes.

There are still instances where the application of the HVR by force of law can conflict with the express terms contained in a bill of lading, so cargo interests need to think carefully before agreeing to vary a choice of law clause. 

The HR package limit refers to £100 gold value. It was not necessary to the court’s decision to decide what the proper date for converting that into local currency was. However, the court indicated that the approach suggested by Mr Justice Hobhouse in The Rosa S [1988], by reference to the date of delivery of the goods or on which they should have been delivered (and adopted by Males J at first instance in this case), is probably correct.

Read other items in the Shipping and Commodities Brief - September 2016