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Gard News 206, May/July 2012

A recent English court judgment considers whether the Hague-Visby Rules apply to a carriage contract in circumstances where the cargo was carried on deck.

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The BBC GREENLAND decision1 discusses the validity of an "on deck" statement on the face of a bill of lading and illustrates the effect this has on the application of the Hague-Visby Rules and a claim by cargo interests.

The Hague-Visby Rules (the Rules) apply to contracts of carriage and goods as defined in Article 1 of the Rules as follows:

"... (b) "contract of carriage" applies only to contracts of carriage governed by a bill of lading or any similar document of title, insofar as such document relates to the carriage of goods by sea...

(c) "goods" includes goods, wares, merchandise, and articles of every kind whatsoever except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried..." (emphasis added).

Background
The case concerned a bill of lading claim by cargo interests for loss/damage to two pieces of deck cargo on a voyage from Italy to the US.

The bill of lading actually provided that London arbitration applied to disputes but that the carrier could elect to commence suit in the US if the US Carriage of Goods by Sea Act 1936 (US COGSA) applied and that, if the carrier did so elect, the United States courts should have exclusive jurisdiction.  There was a statement on the face of the bill of lading which provided:

"all cargo carried on deck at shipper's/charterer's/receiver's risk as to perils inherent in such carriage, any warranty of seaworthiness in the vessel expressly waived by the shipper/charterer/receiver and in all other respects subject to the provisions of the United States Carriage of Goods by Sea Act 1936."

Cargo interests had commenced proceedings in the US against the registered owner of the vessel and intended to pursue London arbitration against the carrier. However, the carrier started court proceedings in the US against cargo interests seeking to avoid liability completely and/or rely on the US COGSA package limit of USD 500 per package. This is on the basis that the cargo was deck cargo and US COGSA and hence US jurisdiction applied under the wording of the bill of lading.  Cargo interests denied that US COGSA applied and commenced London arbitration. They also issued a claim form in the English court seeking an anti-suit injunction restraining the carrier from continuing the court proceedings in the US on the basis that such proceedings were in breach of an agreement in the bill of lading to subject claims to London arbitration. The carrier then applied to the English court to set aside service of the cargo claimant's claim form and to order that the English court had no jurisdiction.  If the carrier succeeded in this regard then it followed that an anti-suit injunction should not be granted.

The key issues
The main issue in the case was the applicability of the Rules to the deck carriage. If the Rules applied, any bill of lading provision that relieved or lessened the carrier's liability (such as the package limit in US COGSA) would, in accordance with Article III Rule 8 of the Rules, be "null and void and of no effect". Since there was no dispute that the cargo had in fact been carried on deck, a key issue was whether, as per Article 1 (c) of the Rules quoted above, the bill of lading stated the cargo as being carried on deck.

The decision
The claimant submitted that the bill of lading clause only went as far as providing for a liberty to carry and an exclusion of liability if cargo was carried on deck.  The carrier submitted that the wording on the face of the bill was clear.  The carrier also submitted that there were a number of previous shipments of cargo between the same parties where cargo had been carried on deck and which had used the same form of words, which formed a course of dealing. The judge agreed with the carrier's arguments and concluded that the bill of lading stated the cargo as being carried on deck. The cargo was so carried and was not therefore "goods" within the meaning of the Article 1 (c) of the Rules. The Rules therefore did not apply and the carrier's application to set aside service of the claim form was accepted.

It is worth mentioning an alternative argument by the claimants that the parties incorporated the Rules contractually by the terms of the bill of lading. To do so is typical in the container trade, where containers may be stowed on or under deck. In this case, the bill of lading terms only applied the Rules where they applied compulsorily, which was not the case as the deck cargo was not "goods" within the Rules definition.

Conclusion
It is well known that the inclusion of a valid on-deck statement in a bill of lading will mean that the Hague-Visby Rules do not apply. Here, because of the way in which the bill of lading was worded, the validity of the on-deck statement was key to both jurisdiction and package limitation. Success for the carrier is likely to mean that their liability for cargo claims is limited to just USD 1,000.

The decision therefore illustrates the importance of ensuring that where cargo is carried on deck a valid on-deck statement is included in the bill of lading. It is important to ensure that the statement is not just a general liberty to carry on deck but is a statement that specific cargo being carried is carried on deck. The judge noted in the case that the wording would have been clearer if the word "is" had been inserted so that the statement read "all cargo is carried on deck...". It is certainly preferable that specific words are used to make the position clear, such as "ten of ten packages are carried on deck at shippers/charterers/receiver's risk". If in this example less than 10 packages are carried on deck, it would be preferable to state the marks identifying each package carried on deck.2

The case also illustrates the lengths to which some cargo interests may be inclined to go to try and maximise a recovery from a carrier with an anti-suit injunction sought against the carrier to prevent them from proceeding in the US.

Footnotes
1Sideridraulic Systems SpA and Anr v. BBC Chartering & Logistic GmbH & Co KG,  The BBC GREENLAND [2011] EWHC 3106 (Comm).
2 See also the article "Cargo shipped on deck - The imperfect bill of lading" in Gard News issue No. 160 (2001).

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