Navigating the global liability defence agenda

Shipping container crisis and carriers’ liability under Peruvian law

Introduction

Many factors have shaped the container crisis, COVID-19 pandemic being the principal one:

(i) shipping containers were stranded at different ports due to the inability to return to China at COVID-19’s early stage

(ii) disruptions of maritime traffic flow due to ports operating at a much lower capacity and

(iii) steady delay in products’ delivery due to manufacturing restrictions. Companies decided to charter their own vessels, increasing existing traffic of ships queueing up to disembark cargo, and creating heavy bottlenecks at sea.  

The situation had repercussions in the shipping industry, including cargo delays and losses, amongst others. We will analyse the manner in which these claims would be resolved by Peruvian law.

Carrier’s liability under The Hague Rules

Bills of lading document contracts of carriage, which contain clauses regarding the carrier’s liability and refer to international conventions that pursue a uniform treatment of the matter. The 1924 International Convention for the Unification of Certain Rules of Law relating to Bills of Lading (also known as “The Hague Rules”) is the only convention on the subject in force in Peru. In addition, where absence of regulation by The Hague Rules, the 1902 Code of Commerce and the 1984 Civil Code apply.

Peruvian law may step in under the following scenarios: (i) it is set as the applicable law; or, (ii) local courts are competent and another applicable law was not chosen. On (ii), according to the Civil Code, local courts are competent: (a) when the claim is against a defendant domiciled in Peru; (b) when the defendant is non-domiciled; (c) when the contract was executed in the country or obligations were performed in Peru; or (d) when the parties expressly set Peru as the competent jurisdiction.  

The Hague Rules indicate that carriers are liable in relation to cargo loading, handling, stowage, carriage, custody, care and discharge. Additionally, a list of liability exemptions in favour of carriers is provided, such as:

  1. unseaworthiness, unless caused by want of due diligence of the carrier
  2. act, neglect, or default of the master, mariner, pilot, or servants of the carrier in navigation/management of the ship
  3. quarantine restrictions and
  4. any cause arising without actual fault or privity of the carrier, his agents or servants.

According to The Hague Rules – with exceptions irrelevant to this article - carriers’ liability shall not exceed 100 sterling pounds per package or unit, or its equivalent in other currency, in any event of loss or damage to cargo, or in connection with this.

Carrier’s liability under Peruvian law

The Hague Rules do not expressly mention carrier’s liability for loss resulting from delay. Hence, the following positions prevail: (1) “damage” for which carriers shall respond is not limited to damages to goods under carriage, but refers to damages suffered by cargo interests as a result of delay; or, (2) delay shall be regulated by member states’ domestic law.

Regarding (2), the Code of Commerce provides that carriers are liable for damages caused in an event of “voluntary delay” of the master. Despite insufficient material defining “voluntary delay”, we consider it is the conscious will of the master to disregard the original itinerary, meaning that there were no external factors (e.g., force majeure or a vessel’s malfunction) making advisable such decision, but a voluntary motive behind making the delay desirable. This would need to be assessed on a case by case basis, broadening the scope of potential claims on delays under Peruvian law.

Likewise, where delays are not regulated by The Hague Rules, liability limits set therein would not be applicable. Therefore, carriers would not be able to invoke liability limits unless internal provisions stipulate so, which is not the case under Peruvian law. 

Particularly relevant to this analysis is the “quarantine restrictions” exemption to carriers’ liability. While many ports are setting restrictions to vessels due to COVID-19, neither meaning nor confines of the concept are found in The Hague Rules. The Civil Code regulates force majeure or acts of God events as the only liability exemptions for non-performance of contractual obligations, restricting its releasing effects only for the duration of the event. Quarantine restrictions may fit within the force majeure concept but, according to the Civil Code, they would only be considered as such if they are extraordinary, unexpected and irresistible.

Today, quarantine restrictions may not be taken neither as extraordinary nor as unexpected, as they are a common measure informed ahead by jurisdictions. Therefore, in Peru this exemption would be difficult to be resorted to by carriers.

Conclusion

Carrier’s liability international regulatory framework set in The Hague Rules requires domestic legislation input on aspects not covered by those rules. In Peru, a case by case analysis would be required to determine carriers’ liability due to delays under the Code of Commerce, subject to the broad concept of voluntary delay by the master. Furthermore, it may be argued that liability limits are not  applicable to delays, as The Hague Rules limits would not apply and, in Peru, there are none. Likewise, carriers may not resort to “quarantine restrictions” as a liability exemption, as today these limitations are ordinary and expected.

While claims may arise as cargo arrives with delays, is undelivered, damaged or lost due to the shipping container crisis, insurers shall consider that local legislation and case law may be relevant for the outcome of a cargo liability claim.