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Is limitation under the Hague Rules more generous than the Hague/Visby Rules?

Author: M Jagannath
Date: July 28, 2014

This article discusses the limitation of liability available under the Hague and Hague/Visby Rules. It also cites instances where limitation of liability under the Hague Rules may actually be better than the Hague/Visby Rules.

 

  1. The International Convention for the Unification of Certain Rules of Law relating to Bills of Lading (commonly known as the “Hague Rules”) came into effect in 1924 so as to protect cargo owners from widespread exclusion of liability by the sea carriers. It was subsequently amended in 1968 and known as the “Hague/Visby Rules” – The Hague Rules as amended by the Brussels Protocol. Since then, there have been other conventions such as The Hamburg Rules and The Rotterdam Rules which has further defined the risks which must be borne by the carrier. These conventions also specify the maximum protection the carrier could claim from exclusion and limitation of liability clauses. The later conventions are felt to be more “cargo friendly” in that the limitation of liability amounts have been increased and it has become more difficult for the carriers to exclude liability.

  1. This article focuses on the limitation of liability available under the Hague Rules and the Hague Visby Rules and also discusses whether it is beneficial for cargo interests to come either under the Hague or the Hague/Visby Rules. We have not considered the Hamburg Rules as it is not widely used or the Rotterdam Rules as it is yet to come in force.

  1. The relevant limitation clauses in the Hague and the Hague/Visby Rules are given below:

i)             Article IV(5) of the Hague Rules states:“Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connexion with goods in an amount exceeding 100 pounds sterling per package or unit."

Article IX further defines the monetary unit provided in Article IV (5) of the Hague Rules and states:“The monetary units mentioned in this convention are to be taken to be gold value.Those contracting states in which the pound sterling is not a monetary unit reserve to ….”

ii)            The corresponding limitation Article of the Hague/Visby Rules is Article IV(5)(a) and states:

Unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading, neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the goods in an amount exceeding 666.67 units of account per package or unit or 2 units of account per kilogramme of gross weight of the goods lost or damaged, whichever is the higher."


Article IV(5)(c) of the Hague/Visby Rules goes on to state:

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 purposes of this paragraph or units are concerned. Except as aforesaid such article of transport shall be considered the package or unit.

The Hague/Visby Rules therefore define as to what a package is for the purpose of limitation whereas this is not the case in the Hague Rules.

You will note that while the Hague Rules provide only for package limitation, the Hague/Visby Rules provide for either the package or weight limitation depending on whichever is higher. Weight limitationi under the Hague/Visby Rules may therefore be of some benefit in some instances but for the purpose of this article, we are comparing the package limitation between the Hague and the Hague/Visby Rules.

 

  1. In the container liner trade, especially in the short sea trades, there are various parties involved such as the vessel operator, slot charterer, container operator, cargo interests etc. While it is more often the case, the Bills of Lading issued to the cargo interests reflect the details of the cargo inside the container albeit with a qualification “said to contain” (unless the cargo has been packed by the carrier in their container freight station), there are exceptions and that some the Bills of Lading issued to the cargo interests may not list the complete details of the cargo loaded in the container but may only mention the container no’s.

  1. The question which arises is what is a package? In the case of the Hague/Visby Rules, this is clearly defined in Article IV(5)(c) i.e. the number of packages or units enumerated in the bills of lading (please see para 2ii) above). While this has not been clearly defined in the Hague Rules, this was deliberated upon in Nigerian National Shipping Line Ltd v Owners of Cargo lately on board ship “River Gurara[1997] WLR 1128 decided by the English Court of Appeal and which held that under the Hague Rules, for the purpose of limitation, the description in the bill of lading was not decisive. Instead, ship owners limit of liability under the Hague Rules would be calculated on the number of packages that are proved to have been loaded within the containers and not upon the number of containers shown in the Bills of Lading. This means that even if the B/L only lists the container number, the cargo interests could provide evidence to substantiate the number of packages actually loaded in the container/s and this will be the packages which will be considered for limitation. This being the case, under the Hague Rules irrespective as to what is mentioned in the Bill of Lading, the packages will be determined on the basis of what has been loaded in the container (with the representation on the bills of lading certainly acting as strong evidence).

  1. The above judgement is certainly helpful to cargo interests. While English judgements certainly are persuasive in other jurisdictions, they are not binding. This being the case, this issue may again be litigated in a different court and it remains to be seen whether a new interpretation will be given to “package” for the purpose of limitation under the Hague Rules. With respect to the Hague/Visby Rules, as it is sufficiently provided in Article IV(5)(c), we do not believe that this will be an issue which may be litigated. What could be litigated is perhaps on the rectification of the Bills of Lading issued by the Carriers with the cargo interests alleging that the Carriers have not issued Bills of Lading as per the details provided as stated under Art III (3) of the Rules i.e.

    After receiving the goods into his charge the carrier or master or agent of the carrier shall, on demand of the shipper, issue to the shipper a bill of lading showing among other things:

    (a)  The leading marks necessary for the identification of the goods as the same are furnished in writing by the shipper before the loading of such goods starts, provided such marks are stamped or otherwise shown clearly upon the goods if uncovered, or on the cases or coverings in which such goods are contained, in such a manner as should ordinarily remain legible until the end of the voyage.

    (b)  Either the number of packages or pieces, of the quantity, or weight, as the case may be, as furnished in writing by the shipper.

    (c)  The apparent order and condition of the goods.

    Provided that no carrier, master or agent of the carrier shall be bound to state or show in bill of lading any marks, number, quantity or weight which he has reasonable ground for suspecting not accurately to represent the goods actually received, or which he has had no reasonable means of checking.”

  1. With respect to the limitation amount of “100 pounds sterling per package or unit” stated in the Hague Rules, the English Courts in The Rosa S [1988] 2 Lloyds Rep 574 stated that the value should not be the paper value but by reference to the quantity of gold which was the equivalent of £100 sterling in 1924. In The Rosa S, the equivalent sum was calculated to be £6,630. (which is more than the package limitation available under the Hague Visby Rules and which is SDR 666.67 per package and at the time of writing this article equates to approx. USD 1,023). The decision of The Rosa S was considered in Diary Containers Ltd v Tasman Orient Line CV (the “Tasman Discoverer”) [2004] UKPC 22 which went all the way to the Privy Council. In this case, both the New Zealand Court of Appeal and the Privy Council did not follow the The Rosa S as the facts of the case were not similar in that the incorporation of the Hague Rules was by way of contract and not mandatory. In the Tasman Discoverer, the bill of lading was issued in a non-Hague Rules jurisdiction and the Rules were contractually incorporated into the bills of lading. Hence, both the Court of Appeal and the Privy Council stated that it was possible for the parties to contractually modify the Hague Rules.

  1. In conclusion, while the package limitation amounts in the Hague Rules may appear to be lower than the Hague Visby Rules, the actual fact is that in some cases, the Hague Rules limitation are actually higher due to the application of the gold value as provided in Clause IX of the Hague Rules. Further, if the bills of lading do not list the no of packages loaded in the container, under the Hague Rules, subject to cargo interests providing evidence on the packages loaded, they would be entitled to seek limitation for all of the packages loaded. However, in the Hague/Visby Rules, this option is not available due to Article IV(5)(c) of the Hague/Visby Rules.
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. (a) Unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading, neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the goods in an amount exceeding 666.67 units of account per package or unit or 2 units of account per kilogramme of gross weight of the goods lost or damaged, whichever is the higher.

(b) The total amount recoverable shall be calculated by reference to the value of such goods at the place and time at which the goods are discharged from the ship in accordance with the contract or should have been so discharged.

The value of the goods shall be fixed according to the commodity exchange price, or, if there be no such price, according to the current market price, or, if there be no commodity exchange price or current market price, by reference to the normal value of goods of the same kind and quality.

(c) 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. Except as aforesaid such article of transport shall be considered the package or unit.

(d) The unit of account mentioned in this Article is the Special Drawing Right as defined by the International Monetary Fund. The amounts mentioned in sub-paragraph (a) of this paragraph shall be converted into national currency on the basis of the value of that currency on the date to be determined by the law of the Court seized of the case. The value of the national currency, in terms of the Special Drawing Right, of a State which is a member of the International Monetary Fund, shall be calculated in accordance with the method of valuation applied by the International Monetary Fund in effect at the date in question for its operations and transactions. The value of the national currency, in terms of the Special Drawing Right, of a State which is not a member of the International Monetary Fund, shall be calculated in a manner determined by that State.

Nevertheless, a State which is not a member of the International Monetary Fund and whose law does not permit the application of the provisions of the preceding sentences may, at the time of ratification of the Protocol of 1979 or accession thereto or at any time thereafter, declare that the limits of liability provided for in this Convention to be applied in its territory shall be fixed as follows:

(i) in respect of the amount of 666.67 units of account mentioned in sub-paragraph (a) of paragraph 5 of this Article, 10,000 monetary units;

(ii) in respect of the amount of 2 units of account mentioned in sub-paragraph (a) of paragraph 5 of this Article, 30 monetary units.

The monetary unit referred to in the preceding sentence corresponds to 65.5 milligrammes of gold of millesimal fineness 900. The conversion of the amounts specified in that sentence into the national currency shall be made according to the law of the State concerned. The calculation and the conversion mentioned in the preceding sentences shall be made in such a manner as to express in the national currency of that State as far as possible the same real value for the amounts in sub-paragraph (a) of paragraph 5 of this Article as is expressed there in units of account.

States shall communicate to the depositary the manner of calculation or the result of the conversion as the case may be, when depositing an instrument of ratification of the Protocol of 1979 or of accession thereto and whenever there is a change in either.

 

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